7144131
| Question | Answer |
| short term finance | loans or debt that a business expects to payback within 1 year |
| long term finance | debt or equity used to finance the purchase of non current assets or finance expansion plans. Long term debt is borrowing, a business does not expect to repay in less than 5 years |
| external sources | sources from outside the business |
| internal sources | sources that comes from inside the business ( often when business is more established) |
| retained profit | - profit remaining after all expenses. - profit which is plowed back into business |
| sale of non current (fixed) assets | resources owned by a business which will be used for a period of time longer than a year. eg- machinery - buildings |
| //Internal sources// working capital & equation | capital needs dot finance the day to day running expenses & pay short term debts of a business current assets - current liability =working capital |
| //Internal sources// sale of assets | resources owned by a business which will be used for a period longer than 1 year eg- machinery - buildings |
| //External sources// Short term// Overdrafts | agreement with the bank which allows business to spend more money than they have in their accounts up to an agreed limit. Loan must be paid within 12 months |
| //External sources// Short term// Trade credit | you have been given stock & you have a certain time period to pay it back |
| //External sources// Short term// Debt factoring | selling trade receivables to improve business liquidity |
| //External sources// Long term// Bank loans | provision of finance which the business will repay with interest over an agreed period of time |
| //External sources// Long term// Leasing | - obtaining the use of a non-current asset by paying a fixed amount per time period for a fixed amount of time - ownership remains with the leasing company |
| //External sources// Long term// Hire purchase | Purchase of an asset by paying a fixed repayment amount per time period over an agreed period of time - asset owned by purchasing company on completion of final payment |
| //External sources// Long term// Mortgage | long term loans used for purchase of land or building houses |
| //External sources// Long term// Debenture | bond issued by companies to raise long-term finance usually at a fixed rate of interest |
| //External sources// Long term// Share issue | Source of payment capital available to limited liability companies |
| //External sources// Long term// Government grant | Government support businesses (local) by providing grants & financial assistance to encourage business startups Or assist businesses growth / development |
| Microfinance | - small amounts of capital loaned to entrepreneurs in countries where business finance is difficult to obtain - loans usually repaid after a relatively short period of time. |
| //Cash flow// Cash flow | the amount of money flowing in & out of the business |
| //Cash flow// Cash flow forecast | predicting the flow of money going in & out |
| //Cash flow// working capital | capital needs dot finance the day to day running expenses & pay short term debts of a business current assets - current liability =working capital |
| //Cash flow// working capital cycle | period of time between payment for goods supplied to a business & the business receiving cash for their sale |
| //Cash flow// Trade receivables ( Debtors ) | amount of money owed to the business by customers who have been sold goods on credit |
| //Cash flow// Trade payable ( Creditor ) | amount a business owes to its suppliers for goods bought on credit |
| //Cash flow// Opening balance | first month is the money the business starts with for all other months its the closing balance from the previous month |
| //Cash flow// Net cash flow ( equation ) | cash inflow - cash outflow |
| //Cash flow// Closing balance | opening balance + net cash flow |
| //Income statement// Income statement | financial statement which records revenue, costs & profits of a business for a given period of time |
| //Income statement// Cost of sales ( COS ) | how much it costs to make the goods or provide the services eg. amount paid for raw materials |
| //Income statement// Expenses | Overheads (fixed costs) that have to be paid - rent - heating - advertising - admin costs |
| //Income statement// gross profit eqaution | turnover - COS |
| //Income statement// Profit | Gross profit - expenses |
| // Balance sheets // assets | resources that are owned by a business |
| // Balance sheets // current assets | resources that business owns & expects to convert into cash before date of next balance sheet eg. inventories/trade receivable/ cash |
| // Balance sheets // non current ( fixed assets) | resources that a business owns & expects to use for more that a year eg. machinery/ buildings/land/ computers/ motor vehicles |
| // Balance sheets // Trade recievable | the amount of money owed to the business by customers who have been sold on good credit |
| // Balance sheets // trade payable | the amount a business owes to its suppliers for goods bought on credit |
| // Balance sheets // Liabilities | debts of the business that will have to be paid sometime in the future |
| // Balance sheets // current liabilities | debts of the business which it expects to pay before the date of the next balance sheet |
| // Balance sheets // non current liabilities | debts of the business which will e payable after more than 1 year |
| // Balance sheets // owners equity | the amount owed by the business to its owners, includes capital & retained profit |
| // Ratio Analysis// Ratio | involves taking key figures form the business accounts & then calculating financial ratios |
| // Ratio Analysis// profitability | measure the performance of the business & focus on profit, turnover & the amount invested in a business |
| // Ratio Analysis// Gross profit margin % | - shows the gross profit made on sales turnover - higher better than lower |
| // Ratio Analysis// net profit margin | - helps to measure how well a business controls its overheads & cost of sales - of the difference between the gross profit margin & net profit margin is small, then overheads are probably low |
| // Ratio Analysis// return on capital employed | compares the profit (return) made by the business with the amount of money invested ( capital). relates profit to the size of the business |
| // Ratio Analysis// liquidity | ratios that measure how easily a business can pa off debts |
| // Ratio Analysis// current ratio | focuses on current assets and current liabilities |
| // Ratio Analysis// acid test | -more severe test of liquidity -stocks are not always converted into cash, therefore excluded |
Want to create your own Flashcards for free with GoConqr? Learn more.