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Business Studies > Unit 5 > Flashcards

Unit 5 Flashcards

1
Q

Start-up capital

A

The capital needed by entrepreneur to set up a business

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2
Q

Working capital

A

The capital needed to pay for raw materials, day-to-day running costs and credit offered to customers

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3
Q

Short-term finance

A

Capital required for short periods of time up to one year

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4
Q

Long-term finance

A

Capital required for more than one year

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5
Q

Profit

A

The total gain or loss of money a business has. The amount of money the business is left with after paying for all total expenses from the total revenue

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6
Q

Gross profit

A

The total amount of money the business is left with after paying the cost of goods sold

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7
Q

Liquidity

A

The ability of a firm to be able to pay its short-term debts

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8
Q

Administration

A

When administrators manage a business that is unable to pay its debts with the intention of selling is as a going concern

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9
Q

Bankruptcy

A

The legal procedure for liquidating a business (or property owned by a sole trader) which cannot fully pay its debts out of its current assets

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10
Q

Liquidation

A

When a business ceases trading and its assets are sold for cash to pay suppliers and other creditors

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11
Q

Asset

A

Something a business owns

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12
Q

Liabilities

A

Something a business owes

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13
Q

Current assets

A

Assets that either are cash or likely to be turned into cash within 12 months (inventory and trade receivables or debtors)

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14
Q

Current liabilities

A

Debts that usually have to be paid within one year. Comes in forms of loans, overdrafts

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15
Q

Capital expenditure

A

The purchase of non-current assets that are expected to last for more than one year, such as building and machinery

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16
Q

Revenue expenditure

A

Spending on all costs and assets other than non-currents which include wages, salaries and inventory of materials

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17
Q

Retained earnings

A

Profit after tax retained in a company rather than paid out to shareholders as dividends

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18
Q

Internal sources

A

Raising finance from the business’s own assets or from profits left in the business (retained earnings)

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19
Q

External sources

A

Raising finance from sources outside the business, for example banks

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20
Q

Non-current assets

A

Assets kept and used by the business for more than one year

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21
Q

Overdraft

A

A credit that a bank agrees can be borrowed by a business up to an agreed limit as and when required

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22
Q

Factoring

A

Selling of claims over trade receivables (debtors) to a specialists organisation (debt factor) in exchange for immediate liduidity

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23
Q

Trade credit

A

Being able to receive supplies before payment has been made

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24
Q

Hire purchase

A

A company purchases an asset and agrees to pay fixed repayments over an agreed time period. The asset belongs to the purchasing company once the final payment has been made

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25
Q

Leasing

A

Obtaining the use of an asset and paying a leasing charge over a fixed period, avoiding the need to raise long term capital to buy the asset. The asset is owned by the leasing company

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26
Q

Long-term loans

A

Loans that do not have to be repaid for at least one year

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27
Q

Debentures

A

Long term bonds issued by companies to raise debt finance, often with a fixed rate of interest

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28
Q

Business mortgages

A

Long-term loans to companies purchasing a property for business premises, with the property acting as collateral security

29
Q

Venture capital

A

Risk capital invested in business start-ups or expanding small businesses that have good profit potential but do not find it easy to gain finance from other resources

30
Q

Collateral security

A

An asset which a business pledges to a lender and which just be sold off to pay debt if the loan is not repaid

31
Q

Rights issue

A

Existing shareholders are given the right to buy additional shares at a discounted price

32
Q

Share (equity) capital

A

Permanent finance raised by companies through the sale of shares

33
Q

Micro finance

A

Pricing financial services for poor and low income customers who do not have access to banking services, such as loans and overdrafts offered by traditional commercial banks

34
Q

Crowdfunding

A

The use of small amounts of capital from a large number of individuals to finance a new business venture

35
Q

Cash-flow

A

The sum of cash payments to a business (inflows) less the sum of cash payments (outflows)

36
Q

Cash-flow forecast

A

Estimate of a firm’s culture cash inflows and outflows

37
Q

Insolvent

A

When a business cannot meet it’s short term debts

38
Q

Cash inflow

A

Cash payments into a business

39
Q

Cash outflow

A

Cash payments out of a business

40
Q

Net cash flow

A

Estimated difference between cash inflows and outflows for the period

41
Q

Opening balance

A

Cash held by the business at the start of the month

42
Q

Closing balance

A

Cash held by the business at the end in the month, which becomes next months opening balance

43
Q

Credit control

A

Monitoring of debts to ensure that credit periods are not exceeded

44
Q

Bad debt

A

Unpaid customer’s bills that are now unlikely to ever be paid

45
Q

Overtrading

A

Expanding a business rapidly without obtaining all of necessary finance so that cash-flow shortages develop

46
Q

Break-even point

A

The level of output at which total costs equal total revenue, neither a profit nor a loss is made

47
Q

Cost centre

A

A section of a business, such as department or product that incurs the cost

48
Q

Direct costs

A

These costs can be clearly identified with each unit of production and can be allocated to a cost centre

49
Q

Indirect costs

A

Costs that cannot be identified with a. Unit of production or allocated accurately to a cost centre

50
Q

Fixed costs

A

Costs that do not vary without output in the short run

51
Q

Variable costs

A

Costs that vary with outpur

52
Q

Total cost

A

Variable costs plus fixed costs

53
Q

Profit centre

A

A section of the business to which both costs and revenues can be allocated — so profit can be calculated

54
Q

Average cost

A

Total cost divided by the number of units produced

55
Q

Full costing

A

A method of costing in which all fixed and variable costs are allocated to services or division of a business

56
Q

Contribution costing

A

Costing method that allocates only direct costs to cost/profit centres not overhead costs

57
Q

Marginal cost

A

The additional cost of producing none more unit of output

58
Q

Break-even analysis

A

Uses of cost and revenue data to determine the break-even point of production

59
Q

Margin of safety

A

The amount by which the sales level exceeds the break-even level of output

60
Q

Contribution per unit

A

Selling price less variable cost per unit

61
Q

Budgeting

A

Planning future activities by establishing performance targets, especially financial ones

62
Q

Budget holder

A

Individual responsibility for the initial setting and achievement of a budget

63
Q

Variance analysis

A

Calculating differences between budgets and actual performance, and analysing reasons for such difference

64
Q

Incremental budgeting

A

Uses last year’s budget as a basis and an adjustment is made for the coming year

65
Q

Zero budgeting

A

Setting budgets to zero each year and budget holders have to argue their case to receive any finance

66
Q

Favourable variance

A

Exists when the difference between the budgeted and actual figures leads to a higher-than-expected profit

67
Q

Flexible budgeting

A

Cost budgets for each expense are allowed to vary if sales or production vary from budgeted levels

68
Q

Adverse variance

A

Exists when the difference between the budgeted and actual figure leads to a lower-than-expected profit

69
Q

Delegated budgets

A

Giving some delegates authority over the setting and achievement of budgets to junior managers

Business Studies (6 decks)

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