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Level 5

Section 5


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Start-Up Capital
the finance needed by a new business to pay for essential fixed and current assets before it can begin trading
Working Capital
the finance needed by a business to pay its day to day costs
Capital Expenditure
money spent on fixed assets which will last for more than one year
Revenue Expenditure
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
obtained finance from within the business itself
External Finance
obtained finance from sources outside of and separate from the business
Micro-Finance
providing financial services - including small loans - to poor people not served by traditional banks
Cash Flow
the cash inflows and outflows over a period of time
Cash Inflows
the sums of money received by a business during a period of time
Cash Outflows
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, etc. and receiving cash from the sale of goods
Profit
the surplus after total costs have been subtracted from sales revenue
Cash Flow Forecast
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
Opening Cash/Bank Balance
the amount of cash held by the business at the start of the month
Net Cash Flow
the difference, each month, between inflows and outflows
Closing Cash/Bank Balance
the amount of cash held by the businessat the end of each month. This then becomes next month's opening balance
Accounts
the financial records of a firm's transactions
Accountants
the professionally qualified people who have responsibility for keeping accurate accounts and for producing the final accounts
Final Accounts
they are produced at the end of each year and give details of the profit or loss made over the year and the worth of the business
Income Statement
a document that records the income of a business and all costs incurred to earn that income over a period of time (for example one year). It is also know as a profit and loss account
Gross Profit
it's made when sales revenue if greater than the cost of goods sold
Sales Revenue
the income to a business during a period of time from the sale or goods or services
Cost of Goods Sold
the cost of producing or buying in the goods actually sold by the business during a time period
Trading Account
it shows how the gross profit of a business is calculated
Net Profit
the profit made by a business after all costs have been deducted from the sales revenue. It is calculated by subtracting overhead costs from gross profits
Depreciation
the fall in the value of a fixed asset over time
Retained Profit
the net profit reinvested back into a company, after deducting tax and payments to owners, such as dividents
Balance Sheet
shows the value of a business's assets and liabilities at a particular time. Sometimes referred to as 'statement of financial position'
Assets
items of value which are owned by the business. They may be fixed (non-current) or short-term current assets
Liabilities
the debts owed by the business
Non-Current Assets
items owned by the business for more than one year
Current Assets
owned by a business and used within one year
Non-Current Liabilities
long term debts owed by the business
Current Liabilities
short term debts owed by the business
Liquidity
the ability of a business to pay back its short term debts
Capital Employed
it's shareholder's equity plus non-current liabilities and is the total long-term and permanent capital invested in a business
Illiquid
means that assets are not easily convertible into cash