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Unit 3- Business and finance Flashcards

1
Q

What is Debt?

A

Debt is money that has to be paid back to either a business or an individual.

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2
Q

What is credit rating?

A

Credit rating is a score given to an individual based on how likely they are to repay debts.

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3
Q

Define Bankrupt

A

This is when an individual or organisation legally states that they are unable to pay their debts.

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4
Q

What is Solvent?

A

Solvent is the ability to repay debts and day to day expenditures.

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5
Q

What is a current account?

A

An account with a bank or building society which is used for regular use e.g. Withdrawals and regular deposits.

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6
Q

What is an overdraft?

A

The ability to withdraw money that is not in your current account.

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7
Q

Define saving

A

Placing money in a safe and secured place so it can grow in value and be used in the future.

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8
Q

Define investments

A

Investment is an asset or item acquired with the goal of generating income or appreciation.

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9
Q

What is financial transactions?

A

Financial transactions is an action by a business that involve money either going into or out of a business e.g. making a sale or paying a bill.

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10
Q

What is HM revenue & Customs (HMRC)?

A

HMRC is a British government department responsible for the collection of all types of taxes.

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11
Q

What is expenditure?

A

Expenditure is the amount of money you will need to cover your expenses/outgoings e.g. mortgages or bills.

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12
Q

What is a shareholder?

A

A shareholder is someone who has invested in a company in return for equity i.e. a share in a business.

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13
Q

What is interest rate?

A

Interest rate is the cost of borrowing money or a reward for saving money.

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14
Q

What is insurance?

A

Insurance is an agreement with a third party to provide compensation against any financial losses that line with the conditions laid down in the policy agreement.

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15
Q

What is premiums?

A

Premiums is regular payments made by an individual or company to an insurance provider in return for protection.

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16
Q

Define Fraud

A

Fraud is when an individual acquires company money for personal gain through illegal actions.

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17
Q

What is profit?

A

Profit is when the total revenue in the business surpasses the total costs of a business.

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18
Q

What is loss?

A

Loss is when the total costs of a business surpasses the total revenue in a business.

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19
Q

What is gross profit?

A

Gross profit is the sales revenue in a business minus the cost of good ( cost of materials need to produce the quantity of products)

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20
Q

Define Sales revenue

A

Sales revenue is quantity sold multiplied by selling price of the product.

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21
Q

Define Net profit

A

Net profit is gross profit minus other expenses e.g. rent or advertising

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22
Q

What is trade receivables?

A

Trade receivables is money owed to the business from sales made but not yet paid for.

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23
Q

What is trade payable?

A

Trade payable is money the business owes from suppliers purchased but not yet paid for.

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24
Q

What is fixed assets?

A

Fixed assets are items of value owned by a business that are likely to stay in the business for more than one year e.g. machinery. It is also known as non-current assets.

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25
Define Asset
Asset is any item of value owned by an individual or firm.
26
Define Commission
A commission is a fee paid to a salesperson in exchange for services in facilitating or completing a sales transaction. Commission could be a flat fee or a percentage of revenue, gross margin or profit generated by the sale. It could also be charged by brokers to assist in the sale of security e.g. properties.
27
What is capital items?
Capital items are assets bought from capital expenditure such as machinery or vehicles that will stay in the business for more than a year.
28
What is a statement of financial situation?
A statement of financial situation is a financial document that shows the net worth of a business by balancing its assets against its liabilities. It if often called a balance sheet.
29
What is depreciation?
Depreciation is an accounting technique used to spread the cost of an asset over its useful life.
30
What is internal sources of finance?
Internal sources of finance is money available to fund expenditure from within the business.
31
What is a cash flow forecast?
A cash flow forecast is a document that shows the predicted flow of cash into and out of a business over a given period of time which is normally 12 months.
32
Define opening balance
Opening balance is an amount of cash available in a business at the start of a set time period.
33
Define closing balance
Closing balance is the amount of cash available in a business at the end of a set time period.
34
Define credit period
Credit period is the length of time given to customers to pay for goods or services received.
35
Define liquidity
Liquidity is measures a firm ability to meet short-term cash payments.
36
Define Insolvent
Insolvent is when a firm is unable to meet short-term cash payments.
37
Define a statement of comprehensive income
This statement shows the trading position of the business which is used to calculate gross profit. It then takes into account all other expenses to calculate the profit or loss for the year.
38
Define a statement of financial position
This statement is a snapshot of a business's net worth at a particular moment in time.
39
Define costs of goods sold
Costs of goods sold is the actual value of inventory used to generate sales.
40
Define opening inventory
Opening inventory is the value of inventory in a business at the start of a financial year.
41
Define closing inventory
Closing inventory is the value of inventory at the end of a financial year.
42
Define historic cost
Historic cost is the cost of an asset when it was first purchased.
43
Define expected life
Expected life is how long an asset is expected to be used within a business.
44
Define residual value
Residual value is the value of an asset when it is disposed of by the business.
45
Define capital assets
Capital assets are items owned by the business that change in value on a regular basis e.g. stock.
46
Define capital employment
Capital employment is the total amount of capital tied up in a business at a point in time. it is calculated as owners or shareholders capital + retained profits - drawings.
47
Total Revenue Formula
Selling price x Quantity sold
48
Total Costs Formula
Fixed cost + Variable cost
49
Profit Formula
Total Revenue - Total Costs
50
Total Contribution Formula
Sales revenue – total variable costs
51
Contribution per unit formula
Selling price – variable costs
52
Profit using contribution formula
Contribution per unit x margin of safety
53
Break even output Formula
Total Fixed Costs/Unit Contribution
54
Margin of Safety Formula
Actual sales – break even level of output ​
55
Gross Profit Margin
Gross Profit/Revenue x 100
56
Mark up Formula
Gross Profit/Cost of Sales x 100
57
Profit Margin Formula
Profit/Revenue x 100
58
Return on Capital formula
Profit/Capital employed x 100
59
Net Current Assets Formula
Current Assets - Current Liabilities
60
Net Assets Formula
Non current assets + net current assets – long term liabilities ​
61
Capital Employed Formula
Opening Capital + Profit for the year
62
Current Ratio Formula
Current Assets/Current Liabilities
63
Liquid Capital ratio Formula
Current Assets-Inventory/Current Liabilities
64
Trade Payable days Formula
Trade Payables/Credit Purchases x 365
65
Trade Receivables Formula
Trade Receivable/Credit Sales x 365
66
Gross Profit Formula
Sales Revenue-Cost of goods sold
67
Costs of good sold Formula
Opening inventory + purchases – closing inventory
68
Net Cash Flow Formula
Total Cash Inflow - Total Cash Outflows
69
Closing Balance Formula
Opening balance + net cash flow
70
Net Profit Formula
Total Revenue - Total Expenses
71
Types of financial institutions
Bank, Credit Unions, Insurance companies

Business (1 decks)

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