U3 Terms summative 12/03 Flashcards
1
Q
Capital expenditure
A
Finance spent/ business spending on fixed assets
2
Q
Finance
A
The available money that an organization has to fund its business activities
3
Q
Revenue expenditure
A
refers to the finance spent on the daily running of a business
4
Q
Average cost
A
The cost per unit of output. (AC= total cost/ Quantity of output)
5
Q
Average revenue
A
The amount a business receives from its customers per unit of a good or service sold
6
Q
Costs
A
The charges that an organization has from it’s operations such as rent, wages, salaries etc
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
8
Q
Fixed costs
A
Costs which do not change with the level of output
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
10
Q
Price (average revenue)
A
Amount of money a product is sold for
11
Q
Revenue
A
The income received by a business from the sale of goods/ services
12
Q
Revenue stream
A
The different sources of revenue/ income of a business i.e. sponsorship deals, sales, membership fees etc
13
Q
Total cost
A
The total amount of money spent on the output of a business
14
Q
Total revenue
A
The sum of income received by a business from its trading activities (sales revenue)
15
Q
Variable costs
A
Costs which change with the level of output, they rise when output or sales increase
16
Q
Assets
A
Possessions owned by a business which have monetary value i.e. buildings, land, machinery, equipment etc.
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
18
Q
Cash
A
The money an organization has “in hand” or at bank. It is the most liquid asset
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.
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
21
Q
Creditors
A
(trade creditors) refers to the suppliers who allow a business to purchase a good or service using trade credit
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
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.
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
25
Dividends
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
26
Equity
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
27
Expenses
The firm's indirect costs of production such as salaries, utilities, repairs and maintenance
28
Final accounts
Published accounts of an organization which are made available to the public and are used by different stakeholders
29
Finished goods
The final products of a business before they are ready to be sold
30
Fixed assets
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
31
Goodwill
The reputation and established networks of an organization which adds to the firm's monetary value
32
Gross profit
The profit obtained from a firm's everyday trading activities. Calculated by doing sales revenue - COGS
33
Illiquid assets
Items of value owned by the business which cannot be sold quickly or are difficult to sell. These often cause significant loss in value
34
Intellectual property rights
(IPRS) a firm's fixed intangible assets with a monetary value, comprised of goodwill, patents, copyright and trademark
35
Liabilities
The debts of a business (money owed to others)
36
Net assets
The overall value of an organization's assets after all its liabilities are deducted. (total assets - total liabilities)
37
Non-current assets
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
38
Non-current liability
A long term liability, it's a debt of a business which takes over a year, of the balance sheet date to pay back
39
Overdrafts
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
40
Patents
The official rights given to a business to exploit an invention or process for commercial use
41
Profit and loss account
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.
42
Profit after interest and tax (profit for period)
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
43
Profit before interest and tax
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
44
Raw materials
These are natural resources used in the production process to create goods and provide services to customers
45
Retained profit
(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
Sales revenue
Shown on the profit and loss account to refer to the money an organization earns from selling goods and/or services
47
Share capital
The value of equity in a business which is funded by its shareholders, either through an IPO or via share issuing
48
Short-term loans
Loans from commercial lenders which have to be paid back in 12 months or less
49
Stocks
Also known as inventory and are goods which a business has available for sale per time period
50
Tax
Refers to the compulsory deductions paid to the government as a proportion of a firm's profit
51
Total assets
Sum of all the current and non-current assets
52
Trade creditors
Suppliers which give trade credit to be paid at a later date, typically 30-60 days
53
Total liabilities
Sum of the current an non-current liabilities
54
Trademarks
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
Window dressing
Legal manipulation of financial statements in order to make figures look more flattering to stakeholders and potential investors
56
Work-in progress
Semi finished goods which are parts and components used in the production process
57
Working capital
Money available for the daily running of a business. (Current liabilities - current assets)
58
Acid test ratio
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
Capital employed
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
Current ratio
Is a short term liquidity ratio which calculates the ability of an organization to meet its short term debts
61
Gross profit margin
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
Liquidity
Refers to the each with which a business is able to convert its assets into cash without affecting market value
63
Liquidity ratios
Financial ratios which examine and organization's ability to pay its short term liabilities and debts- current and acid test ratios
64
Profit
Financial surplus/ value of sales revenue after all costs, including expenses, have been paid
65
Profit margin
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
Ratio analysis
Quantitative management planning and decision making tool which analyses and evaluates the financial performance of a business. profitability, liquidity and efficiency ratios
67
ROCE (return on capital employed)
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
Bad debt
occurs when a debtor is unable to pay outstanding invoices to the business. Results in reduced cash inflow for the vendor
69
Cash flow
The movement of an organization's cash in and outflows
70
Cash flow forecasting
Quantitative technique used to predict how cash is likely to flow into and out of the business in a particular period of time
71
Cash flow problems
Liquidity issue where the business has insufficient funds to run its business (cash flow is negative)
72
Cash inflow
Refers to the money coming into the business from earnings (sales revenue) and other sources of finance such as crowdfunding
73
Cash outflow
Refers to money going out of the business to pay for its costs such as the purchase of raw materials, wages, salaries etc.
74
Closing balance
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
Collateral
Financial guarantee, using a firm's fixed assets for the purpose of securing a loan
76
Credit control
Process of monitoring and managing debtors i.e. ensuring only suitable customers are given trade credit/ customers do not exceed credit period
77
Liquidity crisis
When a business is unable to pay its short term debts, can lead to bankruptcy
78
Liquidity position
Measure of the extent to which a business has sufficient liquidity to continue its operations and activities
79
Liquidity problem
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
Net cash flow
Difference between cash inflow and cash outflow per time period
81
Net current assets
(working capital) shown on a balance sheet to show the liquidity position of a business
82
Opening balance
Found in cash flow forecast showing the value of cash held by a business at the beginning of a trading period
83
Working capital cycle
(net current assets) refers to the duration between a business paying for its production costs and receiving cash from customers purchasing the product
84
Accounting rate of return
(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
Cumulative net cash flow
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
Investment
Capital expenditure with the intention of a financial return some point in the future
87
Investment appraisal
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
Payback period (PBP)
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
Principal
the capital outlay or the original amount spent on an investment project.
90
Qualitative investment appraisal
Investment appraisal used to determine whether a project is worth investing using non-numerical techniques e.g. whether it aligns with mission statement
91
Quantitative investment appraisal
Investment appraisal used to determine if investment project is worthwhile based on numerical values such as PBP ARR and NPV
92
Business angels
Wealthy individuals who invest their money in businesses with high growth potential
93
Crowdfundings
Raising finance for a business venture using crowdfunding platforms to obtain small amounts of money from a large group of people
94
External SOF
Finance coming from outside the organization. e.g. business angels, overdrafts etc.
95
Initial public offering (IPO)
Finance raised by a public limited company when it issues and sells shares for the first time on the stock exchange market
96
Internal sources of finance
Finance coming from inside the organization, using its own resources, assets, no help from a third party e.g. retained profits
97
Leasing
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
Loan Capital
Obtaining finance from commercial/ financial lenders
99
Long-term finance
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
Microfinance providers
organizations which lend a small amount of money to small businesses in low income areas
101
Overdraft
When a business takes/ uses more money than it has in its account at the time
102
Personal funds
A type of internal SOF in which entreprenurs use their own savings to finance the business's start up
103
Retained profit
Internal SOF where the money generated by the business is reinvested rather than distributed
104
Sale and leaseback
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
Sale of assets
Internal SOF where businesses sell off their assets which have value to obtain finance
106
Share capital
Finance obtained from selling and issuing shares on the stock exchange
107
Short term finance
Finance needed for the day to day running of a business (revenue expenditure)
108
Sources of finance
Where a firm obtains its money to fund its business activities and operations
109
Stock exchange
Highly regulated marketplace where individuals and businesses can buy and sell shares in public limited companies
110
Trade credit
Financial service which enables a business to obtain a good or a service now and pay for it at a later date
