Topic 1.3 Flashcards
Capital
Money that businesses have to support business operations
Fixed costs
Costs that do not vary with the amount the business produces
Variable costs
Costs that do vary with the amount the business produces
Break even
Point at which revenue and total costs are equal meaning the business makes neither a profit nor a loss
Margin of safety
Amount by which sales can fall before the break even point is reached
Cash flow
Amount of money going in and out of the business and the timing of that movement
Revenue
Income the business receives from sales
Cash
Asset that a business holds which can be used to buy supplies or pay wages
Overheads
Fixed costs / expenses
Solvency
Possession of assets in excess of its liabilities. Ability to pay one’s debts
Insolvent
A business is unable to pay it’s debts and owes more money than it is owed
Cash flow statement
Record of the cash inflows and outflows
Net cash flow
Difference between the cash coming in and out of a business
Internal sources of finance
Finance which is raised internally that doesn’t increase the debts of the business (retained profit, personal savings)
External sources of finance
Finance provided by people or institutions outside the business which creates a debt that requires payment (loans, overdraft, shares)
Overdraft
When the bank allows you to withdraw more money from your account than you have in it
Trade credit
Items are brought on a buy now pay later basis
Crowdfunding
Way of financing your business through public donations
Opening balance
Amount of money in the bank in the beginning of the month
Closing balance
Amount of money in the bank at the end of the month
