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Business > U3 Terms summative 12/03 > Flashcards

U3 Terms summative 12/03 Flashcards

1
Q

Capital expenditure

A

Finance spent/ business spending on fixed assets

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2
Q

Finance

A

The available money that an organization has to fund its business activities

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3
Q

Revenue expenditure

A

refers to the finance spent on the daily running of a business

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4
Q

Average cost

A

The cost per unit of output. (AC= total cost/ Quantity of output)

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5
Q

Average revenue

A

The amount a business receives from its customers per unit of a good or service sold

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6
Q

Costs

A

The charges that an organization has from it’s operations such as rent, wages, salaries etc

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7
Q

Direct costs

A

Costs which are clearly associated and can be traced back to the output/ sale of a certain good, service or business operation

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8
Q

Fixed costs

A

Costs which do not change with the level of output

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9
Q

Indirect costs

A

Costs which cannot be directly associated with or traced back to the output/ sale of a good service or business operation

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10
Q

Price (average revenue)

A

Amount of money a product is sold for

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11
Q

Revenue

A

The income received by a business from the sale of goods/ services

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12
Q

Revenue stream

A

The different sources of revenue/ income of a business i.e. sponsorship deals, sales, membership fees etc

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13
Q

Total cost

A

The total amount of money spent on the output of a business

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14
Q

Total revenue

A

The sum of income received by a business from its trading activities (sales revenue)

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15
Q

Variable costs

A

Costs which change with the level of output, they rise when output or sales increase

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16
Q

Assets

A

Possessions owned by a business which have monetary value i.e. buildings, land, machinery, equipment etc.

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17
Q

Balance sheet (statement of financial position)

A

A final account which shows the value of a firm’s assets, liabilities and the owner’s investments (equity) at a certain point in time

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18
Q

Cash

A

The money an organization has “in hand” or at bank. It is the most liquid asset

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19
Q

Copyright

A

Intangible asset which give the registered owner legal rights to creative piece of work i.e. the works of writers, musicians, directors etc.

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20
Q

Cost of sales (COGS)

A

There are the direct costs of productions i.e. the cost of raw materials, components and direct labor

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21
Q

Creditors

A

(trade creditors) refers to the suppliers who allow a business to purchase a good or service using trade credit

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22
Q

Current assets

A

Short term assets belonging to an organization which will last in the business for up to 12 months (not more) includes cash debtors and stock

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23
Q

current liabilities

A

Short term debts of a business which need to be repaid in 12 months of the balance sheet date. This includes overdrafts, trade creditors, short term loans etc.

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24
Q

Debtors

A

Current asset which refers to an individual or business customers which owe a business money as they have bought goods or services using trade credit

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25
Q

Dividends

A

Payments from a company’s profit paid to its shareholders. The amount of dividends each shareholder gets depends on the amount of shares they have

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26
Q

Equity

A

The value of the owner’s stake n the business, what the business is worth at the time of the report of the balance sheet

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27
Q

Expenses

A

The firm’s indirect costs of production such as salaries, utilities, repairs and maintenance

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28
Q

Final accounts

A

Published accounts of an organization which are made available to the public and are used by different stakeholders

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29
Q

Finished goods

A

The final products of a business before they are ready to be sold

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30
Q

Fixed assets

A

long term assets of an organization which have monetary value and are used repeatedly but are not intended for resale within the next 12 months

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31
Q

Goodwill

A

The reputation and established networks of an organization which adds to the firm’s monetary value

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32
Q

Gross profit

A

The profit obtained from a firm’s everyday trading activities. Calculated by doing sales revenue - COGS

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33
Q

Illiquid assets

A

Items of value owned by the business which cannot be sold quickly or are difficult to sell. These often cause significant loss in value

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34
Q

Intellectual property rights

A

(IPRS) a firm’s fixed intangible assets with a monetary value, comprised of goodwill, patents, copyright and trademark

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35
Q

Liabilities

A

The debts of a business (money owed to others)

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36
Q

Net assets

A

The overall value of an organization’s assets after all its liabilities are deducted. (total assets - total liabilities)

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37
Q

Non-current assets

A

Also known as fixed assets, refers to the long term assets of an organization with a monetary value but are not intended for resale within the next 12 months of the balance sheet date

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38
Q

Non-current liability

A

A long term liability, it’s a debt of a business which takes over a year, of the balance sheet date to pay back

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39
Q

Overdrafts

A

Financial service where a business is able o obtain/ use more money than it has in its bank account in a certain point of time, it’s a short term source of finance

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40
Q

Patents

A

The official rights given to a business to exploit an invention or process for commercial use

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41
Q

Profit and loss account

A

Also known as an income statement which shows a firm’s profit or loss after all production costs have been subtracted from the organization’s revenue each year.

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42
Q

Profit after interest and tax (profit for period)

A

This is a section of the profit or loss account which shows the actual value of profit earned by the business after all the costs have been accounted for

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43
Q

Profit before interest and tax

A

This is a part of the profit or loss statement which shows the firms profit or loss before deducting interest payments on loans and taxes on corporate profits

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44
Q

Raw materials

A

These are natural resources used in the production process to create goods and provide services to customers

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45
Q

Retained profit

A

(can be referred to as retained earnings) is the value of a firm’s earnings after all interest and taxes are paid and all shareholders have been compensated

46
Q

Sales revenue

A

Shown on the profit and loss account to refer to the money an organization earns from selling goods and/or services

47
Q

Share capital

A

The value of equity in a business which is funded by its shareholders, either through an IPO or via share issuing

48
Q

Short-term loans

A

Loans from commercial lenders which have to be paid back in 12 months or less

49
Q

Stocks

A

Also known as inventory and are goods which a business has available for sale per time period

50
Q

Tax

A

Refers to the compulsory deductions paid to the government as a proportion of a firm’s profit

51
Q

Total assets

A

Sum of all the current and non-current assets

52
Q

Trade creditors

A

Suppliers which give trade credit to be paid at a later date, typically 30-60 days

53
Q

Total liabilities

A

Sum of the current an non-current liabilities

54
Q

Trademarks

A

Intellectual property or an intangible asset which gives the listed owner the legal and exclusive commercial use of the registered brand, logo and/or slogan such as a company’s catchphrase

55
Q

Window dressing

A

Legal manipulation of financial statements in order to make figures look more flattering to stakeholders and potential investors

56
Q

Work-in progress

A

Semi finished goods which are parts and components used in the production process

57
Q

Working capital

A

Money available for the daily running of a business. (Current liabilities - current assets)

58
Q

Acid test ratio

A

Short-term liquidity ratio which measures an organization’s ability to payback it’s short term debts without having to sell any stock (not including stock)

59
Q

Capital employed

A

The value of the funds used to operate the business and generate financial return. This is the sum of the non-current assets and equity

60
Q

Current ratio

A

Is a short term liquidity ratio which calculates the ability of an organization to meet its short term debts

61
Q

Gross profit margin

A

Profitability ration measuring the gross profit as a percentage of its sales revenue. It can indicate how well a business can manage its direct costs of production

62
Q

Liquidity

A

Refers to the each with which a business is able to convert its assets into cash without affecting market value

63
Q

Liquidity ratios

A

Financial ratios which examine and organization’s ability to pay its short term liabilities and debts- current and acid test ratios

64
Q

Profit

A

Financial surplus/ value of sales revenue after all costs, including expenses, have been paid

65
Q

Profit margin

A

profitability ration measuring the firms overall profit as a percentage of its sales revenue. Indicates how well a business is able to manage its indirect costs

66
Q

Ratio analysis

A

Quantitative management planning and decision making tool which analyses and evaluates the financial performance of a business. profitability, liquidity and efficiency ratios

67
Q

ROCE (return on capital employed)

A

Profitability ratio measuring a firm’s efficiency and profitability in relation to its size (as a measure by the value of the organization’s capital employed)

68
Q

Bad debt

A

occurs when a debtor is unable to pay outstanding invoices to the business. Results in reduced cash inflow for the vendor

69
Q

Cash flow

A

The movement of an organization’s cash in and outflows

70
Q

Cash flow forecasting

A

Quantitative technique used to predict how cash is likely to flow into and out of the business in a particular period of time

71
Q

Cash flow problems

A

Liquidity issue where the business has insufficient funds to run its business (cash flow is negative)

72
Q

Cash inflow

A

Refers to the money coming into the business from earnings (sales revenue) and other sources of finance such as crowdfunding

73
Q

Cash outflow

A

Refers to money going out of the business to pay for its costs such as the purchase of raw materials, wages, salaries etc.

74
Q

Closing balance

A

Found in the cash flow forecast and refers to the value of cash held by a business at the end of a trading period

75
Q

Collateral

A

Financial guarantee, using a firm’s fixed assets for the purpose of securing a loan

76
Q

Credit control

A

Process of monitoring and managing debtors i.e. ensuring only suitable customers are given trade credit/ customers do not exceed credit period

77
Q

Liquidity crisis

A

When a business is unable to pay its short term debts, can lead to bankruptcy

78
Q

Liquidity position

A

Measure of the extent to which a business has sufficient liquidity to continue its operations and activities

79
Q

Liquidity problem

A

Cash flow problem where there is a lack of cash in the organization (cash inflow is less than cash outflow, so the business experiences a negative cash inflow)

80
Q

Net cash flow

A

Difference between cash inflow and cash outflow per time period

81
Q

Net current assets

A

(working capital) shown on a balance sheet to show the liquidity position of a business

82
Q

Opening balance

A

Found in cash flow forecast showing the value of cash held by a business at the beginning of a trading period

83
Q

Working capital cycle

A

(net current assets) refers to the duration between a business paying for its production costs and receiving cash from customers purchasing the product

84
Q

Accounting rate of return

A

(average rate of return) Method of investment appraisal which calculates the avg annual profit of an investment project expressed as a percentage of the amount initially invested

85
Q

Cumulative net cash flow

A

The sum of an investment project’s net cash flows for a particular year plus the net cash flows of all the previous years

86
Q

Investment

A

Capital expenditure with the intention of a financial return some point in the future

87
Q

Investment appraisal

A

Formal process of quantifying the financial risks of an investment decision in order to establish whether the expenditure can be justified from a financial perspective

88
Q

Payback period (PBP)

A

Investment appraisal method considering the time it takes for the amount of money invested in a business to be repaid using the profit generated from the initial investment

89
Q

Principal

A

the capital outlay or the original amount spent on an investment project.

90
Q

Qualitative investment appraisal

A

Investment appraisal used to determine whether a project is worth investing using non-numerical techniques e.g. whether it aligns with mission statement

91
Q

Quantitative investment appraisal

A

Investment appraisal used to determine if investment project is worthwhile based on numerical values such as PBP ARR and NPV

92
Q

Business angels

A

Wealthy individuals who invest their money in businesses with high growth potential

93
Q

Crowdfundings

A

Raising finance for a business venture using crowdfunding platforms to obtain small amounts of money from a large group of people

94
Q

External SOF

A

Finance coming from outside the organization. e.g. business angels, overdrafts etc.

95
Q

Initial public offering (IPO)

A

Finance raised by a public limited company when it issues and sells shares for the first time on the stock exchange market

96
Q

Internal sources of finance

A

Finance coming from inside the organization, using its own resources, assets, no help from a third party e.g. retained profits

97
Q

Leasing

A

Allows a business to lease a fixed asset for a certain period of time, doesn’t have to pay full price in order to use it.

98
Q

Loan Capital

A

Obtaining finance from commercial/ financial lenders

99
Q

Long-term finance

A

Refers to sources of finance that last for more than 5 years. Used for the purchase of fixed assets and to fund growth etc.

100
Q

Microfinance providers

A

organizations which lend a small amount of money to small businesses in low income areas

101
Q

Overdraft

A

When a business takes/ uses more money than it has in its account at the time

102
Q

Personal funds

A

A type of internal SOF in which entreprenurs use their own savings to finance the business’s start up

103
Q

Retained profit

A

Internal SOF where the money generated by the business is reinvested rather than distributed

104
Q

Sale and leaseback

A

When you sell an asset and immediately lease it back as a way to gain some money but also have access to the asset that is needed

105
Q

Sale of assets

A

Internal SOF where businesses sell off their assets which have value to obtain finance

106
Q

Share capital

A

Finance obtained from selling and issuing shares on the stock exchange

107
Q

Short term finance

A

Finance needed for the day to day running of a business (revenue expenditure)

108
Q

Sources of finance

A

Where a firm obtains its money to fund its business activities and operations

109
Q

Stock exchange

A

Highly regulated marketplace where individuals and businesses can buy and sell shares in public limited companies

110
Q

Trade credit

A

Financial service which enables a business to obtain a good or a service now and pay for it at a later date

Business (4 decks)

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