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Business > Unit 5 Finance > Flashcards

Unit 5 Finance Flashcards

1
Q

What is Start-up capital?

A

The finance needed by a new business to pay for essential fixed and current assets before it can begin trading

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2
Q

What is working-capital?

A

The finance needed by a business to pay its day-to-day costs.

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3
Q

What is capital expenditure

A

The money spent on fixed assets which will last for more than one year

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4
Q

What is revenue expenditure

A

The money spent on day-to-day expenses which do not involve the purchase of a long-term asset, for example wages or rent

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5
Q
A
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6
Q

What is internal finance?

A

The fincance obtained from within the business itself

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7
Q

What is external finance?

A

The obtained from sources outside of and separate from the business

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8
Q

What is Micro-finance?

A

The providing financial services including small loans to poor people not served by traditional banks

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9
Q

What is cash flow?

A

The cash flow of a business is the cash inflows and outflows over a period of time

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10
Q

What is cash inflows?

A

The sums of money received by a business during a period of timeWh

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11
Q

What is cash outflows?

A

The sums of money paid out by a business during a period of time

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12
Q

What is a cash flow cycle?

A

The stages between paying out cash for labour, materials etc. and receiving cash from the sale of goods

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13
Q

What is profit?

A

The surplus after total costs have been subtracted from sales revenue

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14
Q

What is a cash flow forecast?

A

The estimate of future cash inflows and outflows of a business, usually on a month-by-month basis. This then shows the expected cash balance at the end of each month

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15
Q

What is an opening cash balance?

A

The amount of cash held by the business at the start of the month

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16
Q

What is the net cash flow?

A

The differences between inflows and outflows.

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17
Q

What is closing cash balance?

A

The amount of cash held by the business at the end of each month. This becomes next month’s opening cash balance.

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18
Q

What is working capital?

A

The capital available to a business in the short term to pay for day-to-day expenses

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19
Q

What are accounts?

A

The financial records of a firm’s transactions

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20
Q

What are accountants

A

The professionally qualified people who have responsibility for keeping accurate accounts and the producing the final accounts

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21
Q

What are final accounts

A

The produced at the end of the financial ear and give details of the profit or loss made over the ear and the worth of the business

22
Q

What is an income statement?

A

A document that records the income of a business and all costs incurred to earn that income over a period of time. It is also known as a profit and loss account

23
Q

What is gross profit?

A

When sales revenue is greater than the costs of goods sold

24
Q

What is sales revenue?

A

The income to a business during a period of time from the sale of goods or services

25
Q

What is the cost of goods sold?

A

The cost of producing or buying in the goods actually sold by the business during a time period

26
Q

What is a trading account?

A

It shows how the gross profit of a business is calculated

27
Q

What is net profit?

A

The profit made by a business after all costs have been deducted from sales revenue. It is calculated by subtracting overhead costs from gross profits.

28
Q

What is depreciation?

A

The fall in value of a fixed asset over time

29
Q

What is retained profit?

A

The net profit reinvested back, into a company, after deducting tax and payments to owners, such as dividends

30
Q

What is the balance sheet?

A

It shows the value of a business’s assets and liabilities at a particular time. Sometimes referred to as ‘statement of financial position’

31
Q

What are Assets?

A

Those items of value which are owned by the business. They may be fixed or short-term current assets.

32
Q

What are liabilities

A

The debts owned by the business

33
Q

What are Non-current assets

A

Items owned by the business for more than one year

34
Q

What are current assets

A

They are owned by a business and used within one year

35
Q

What are Non-current liabilities

A

Long term debts owed by the business

36
Q

What are current liabilities?

A

Short term debts owed by the business

37
Q

What is Liquidity?

A

The ability of a business to pay back it’s short-term debts

38
Q

What is capital employed?

A

Shareholders’ equity plus non-current liabilities and is the total long-term and permanent capital invested in a business

39
Q

What is Illiquid

A

It is when assets are not easily convertible into cash

40
Q

What are three Profitability ratios?

A
  1. Return on capitaly employed (ROCE)
  2. Gross profit margin
  3. Net profit margin
41
Q

Give me the formula for ROCE and is it a percentage?

A

Net profit/ Capital employed * 100.
No it is not a percentage

42
Q

Give me the formula for Gross profit margin and is it a percentage?

A

Gross profit/ Sales revenue * 100
Yes it is a percentage

43
Q

Give me the formula for Net profit margin and is it a percentage?

A

Net profit/ Sales revenue * 100
Yes it is a percentage

44
Q

Give me the two Liquidity ratios

A
  1. Current ratio
  2. Acid test / liquid ratio
45
Q

Give me the formula for Current ratio and is it a percentage?

A

Current assets/ Current liabilities
No it is not

46
Q

Give me the formula for Acid test ratio and is it a percentage?

A

Current assets - Inventories / Current liabilities

47
Q

What does gross profit margin mean?

A

It means whatever the percentage is, it is that percentage of 1 dollar in profit per product sold.

EG. 400/1300 x 100 = 30.8%
For every 1dollar they make they make 30.8 cents in gross profit

48
Q

What does the Net profit margin mean?

A

Same as gross profit but deducting expenses such as interests.

49
Q

What does current ratio mean?

A

It determines if the business can pay of debts. If the answer is below 1 then they have more liabilities than assets, vice verca.

50
Q

What does acid test ratio mean?

A

Same as current ratio but excluding inventories

51
Q
A

Business (4 decks)

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