Unit 5 - Financial information and decisions Flashcards
Start-up capital
is the finance needed by a new business to pay for essential non-current & current assets before it can begin trading
Working capital
Is the finance needed by a business to pay for its day-to-day activities
Capital expenditure
is money spent on non-current assets which will last for more than one year
Revenue expenditure
is money spent on day-to-day expenses which do not involve the purchase of a long- term asset, for example, wages or rent
Internal finance
is obtained from within the business itself
External finance
is obtained from sources outside of and separate from the business
Micro-finance
is providing financial services - including small loans - to poor people not served by traditional banks
Crowdfunding
is funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet
The cash flow of the business
is the cash inflows and outflows over a period of time
Cash inflows
are the sums of money received by a business during a period of time
Cash outflows
are the sums of money paid out by a business during a period of time
Cash outflows
are the sums of money paid out by a business during a period of time
cash flow cycle
shows the stages between paying out cash for labour, materials, and so on, and receiving cash from the sale of goods
Profit
is the surplus after total costs have been subtracted from revenue
A cash flow forecast
is an 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
Net cash flow
is the difference , each month, between inflows and outflows
Closing cash (or bank balance)
is the amount of cash held by the business at the end of each month. This becomes next month’s opening cash balance.
Opening cash (or bank balance)
is the amount of cash held by the business at the start of the month
Working capital
is the finance needed by a business to pay for its day-to-day expenses
Accounts
are the financial records of a firm’s transactions
Final accounts
are produced at the end of the financial year and give details of the profit or loss made over the year and the worth of the business
Income statement
Is a financial statement 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
Revenue
is the income to a business during a period of time from the sale of goods and services
Cost of sales
is the cost of producing or buying in the goods actually sold by the business during a time period
Gross profit
is made when revenue is greater than the cost of sales
Trading accounts
shows how the gross profit of a business is calculated
Net profit
Is the profit made by a business after all costs have been deducted from revenue. It is calculated by subtracting overhead costs from gross profits
Depreciation
is the fall in the value of a fixed asset over time
Retained profit
net profit reinvested back into the company, after deducting tax and payments to owners, such as dividends
Statement of financial position
shows the value of a business’s assets and liabilities at a particular time
Assets
are those items of value which are owned by the business. They may be non- current ( xed) assets or currents assets
Liabilities
are debts owed by the business. They may be non-current liabilities or currents liabilities
Non-current assets
are items owned by the business for more than one year
Current assets
are owned by the business and used within one year
Non-current liabilities
are long-term debts owed by the business, repaid over more than one year
Current liabilities
are short-term debts owed by the business, repaid in less than one year
Capital employed
is shareholders’ equity + non- current liabilities and is the total long-term and permanent capital invested in a business
Liquidity
is the ability of a business to pay back its short-term debts
Pro tability
is the measurement of the pro t made relative to either the value of sales achieved or the capital invested in the business
If a Business is Liquid
means that assets are not easily convertible into cash
