Words 2.1 Flashcards
Fixed costs
Costs that stay the same irrespective of the amount of products or services sold eg rent sales
Variable costs
Costs that change in direct proportion to the amount of products or service sold eg raw materials
Working capital
The finance for the day to day running of the business
Angel investors
Investors who back a business before it had opened its door taking a full equity risk ie if it fails the invest will lose everything invested
Collaterol
Asset used as security for a loan. It can be sold by a lender if the borrower fails to pay back a loan
Public limited company (plc)
Company with limited liability and shares which are available to the public
Seed corn capital
The early stage finance that might come from an angle investor
Share capital
Business finance that has no guarantee of repayment or of annual income but gains a share of the control of the business and its potential profits
Stock market
Market for buying and selling company shares. Supervises the issuing of share by companies. Also has a second hand market for stocks and shares
Venture capital
High risk capital invested in a combination of loans and shares usually in small dynamic businesses
Best case
Optimistic estimate of the best possible outcome eg if sale price much higher than expected
Business plan
Document setting out a business idea showing how it can be financed marketed and put into practise
Cash flow forecast
Predictive business management tool which estimates monthly cash inflows and outflows to be able to manage net cash flow
Just in time
Ordering stock so it arrives just before you need it ie having no stock pile to cover for late deliveries
Overdraft
Authorised short term borrowing from the bank only used for Daily Cash deficits
Deficits
Negative balance in cash flow forecast
Surplus
Positive balance in cash flow forecast
Worst case
Pessimistic estimate assuming worst possible outcome eg competitor opens over the road
Retained profits
Profit after tax which is invested back into the business
Debenture
Long term loan to a business from a business
Lease
Essentially hire equipment or resources from another business for the other business this is revenue
Secured loans
Loan where the lender requires security eg property if borrower can’t pay
Unsecured loans
Lender has no protection if borrower fails to repay money owed
Capital gain
Profit made from selling a share for more than it was bought
Under capitalised
Firm not raising enough capital when a business first starts up
