Unit 3 61-70 Flashcards
What is an intangible asset?
Not physical items may be difficult to value and sell e.g. goodwill-buying a businesses customers and reputation
What is straight-line depreciation?
Reduces the value of an asset by the same amount each year.
What is reducing-balance depreciation?
Value of asset reduces by same percentage each year, loss higher during early years
What is revenue expenditure?
Day-to-day costs incurred in running a business e.g. rent, heating, lighting, salaries, wages, marketing
Internal sources of finance
Retained profit
Net current assets
Sale of assets
What is crowd-funding?
Raising funds online by asking people to invest a small amount of money each.
What is venture capital?
Funds from a professional investor in return for a share of the ownership, investor offers guidance and support
What is debt factoring?
Involves selling the business’s invoices to a third party, now owe money to factor agency
What is Leasing?
Allows business to obtain assets without paying large sum
Payments spread out
Asset never belongs to the bussiness
What are Grants?
Government payments to businesses
Given with conditions
Do not have to be paid back
What is trade credit?
Business has use of goods immediately and pays supplier 30-90 days later
No interest paid
Examples of cash inflows
Cash sales, credit sales, loans, capital introduced, sale of assets
Examples of cash outflows
Cash purchases, rent, rates, salaries, wages, utilities, purchase of assets, VAT
Cash flow forecast
Used by the bussiness to identify potential problems with cash flow
Cash flow forecasts benefits/limitations
Benefits=enable business to plan, monitor and control spending more effectively.
Limitations=fail to consider that business can delay payments.
Types of cost
Fixed costs=always incurred by business
Variable cost=increase when business increases activity
Semi-variable costs
Break even point
Point where business starts to generate a larger total revenue than total costs - profit
