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Business Studies > Unit 5 > Flashcards

Unit 5 Flashcards

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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
Leasing
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
26
Long-term loans
Loans that do not have to be repaid for at least one year
27
Debentures
Long term bonds issued by companies to raise debt finance, often with a fixed rate of interest
28
Business mortgages
Long-term loans to companies purchasing a property for business premises, with the property acting as collateral security
29
Venture capital
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
Collateral security
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
Rights issue
Existing shareholders are given the right to buy additional shares at a discounted price
32
Share (equity) capital
Permanent finance raised by companies through the sale of shares
33
Micro finance
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
Crowdfunding
The use of small amounts of capital from a large number of individuals to finance a new business venture
35
Cash-flow
The sum of cash payments to a business (inflows) less the sum of cash payments (outflows)
36
Cash-flow forecast
Estimate of a firm’s culture cash inflows and outflows
37
Insolvent
When a business cannot meet it’s short term debts
38
Cash inflow
Cash payments into a business
39
Cash outflow
Cash payments out of a business
40
Net cash flow
Estimated difference between cash inflows and outflows for the period
41
Opening balance
Cash held by the business at the start of the month
42
Closing balance
Cash held by the business at the end in the month, which becomes next months opening balance
43
Credit control
Monitoring of debts to ensure that credit periods are not exceeded
44
Bad debt
Unpaid customer’s bills that are now unlikely to ever be paid
45
Overtrading
Expanding a business rapidly without obtaining all of necessary finance so that cash-flow shortages develop
46
Break-even point
The level of output at which total costs equal total revenue, neither a profit nor a loss is made
47
Cost centre
A section of a business, such as department or product that incurs the cost
48
Direct costs
These costs can be clearly identified with each unit of production and can be allocated to a cost centre
49
Indirect costs
Costs that cannot be identified with a. Unit of production or allocated accurately to a cost centre
50
Fixed costs
Costs that do not vary without output in the short run
51
Variable costs
Costs that vary with outpur
52
Total cost
Variable costs plus fixed costs
53
Profit centre
A section of the business to which both costs and revenues can be allocated — so profit can be calculated
54
Average cost
Total cost divided by the number of units produced
55
Full costing
A method of costing in which all fixed and variable costs are allocated to services or division of a business
56
Contribution costing
Costing method that allocates only direct costs to cost/profit centres not overhead costs
57
Marginal cost
The additional cost of producing none more unit of output
58
Break-even analysis
Uses of cost and revenue data to determine the break-even point of production
59
Margin of safety
The amount by which the sales level exceeds the break-even level of output
60
Contribution per unit
Selling price less variable cost per unit
61
Budgeting
Planning future activities by establishing performance targets, especially financial ones
62
Budget holder
Individual responsibility for the initial setting and achievement of a budget
63
Variance analysis
Calculating differences between budgets and actual performance, and analysing reasons for such difference
64
Incremental budgeting
Uses last year’s budget as a basis and an adjustment is made for the coming year
65
Zero budgeting
Setting budgets to zero each year and budget holders have to argue their case to receive any finance
66
Favourable variance
Exists when the difference between the budgeted and actual figures leads to a higher-than-expected profit
67
Flexible budgeting
Cost budgets for each expense are allowed to vary if sales or production vary from budgeted levels
68
Adverse variance
Exists when the difference between the budgeted and actual figure leads to a lower-than-expected profit
69
Delegated budgets
Giving some delegates authority over the setting and achievement of budgets to junior managers

Business Studies (6 decks)

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