section 5

Question 1

Capital Employed

Answer 1

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

Question 2

Illiquid

Answer 2

means that assets are not easily convertible into cash

Question 3

Liquidity

Answer 3

the ability of a business to pay back its short term debts

Question 4

Current Liabilities

Answer 4

short term debts owed by the business

Question 5

Non-Current Liabilities

Answer 5

long term debts owed by the business

Question 6

Current Assets

Answer 6

owned by a business and used within one year

Question 7

Non-Current Assets

Answer 7

items owned by the business for more than one year

Question 8

Liabilities

Answer 8

the debts owed by the business

Question 9

Assets

Answer 9

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

Question 10

Balance Sheet

Answer 10

shows the value of a business’s assets and liabilities at a particular time

Question 11

Retained Profit

Answer 11

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

Question 12

Depreciation

Answer 12

the fall in the value of a fixed asset over time

Question 13

Net Profit

Answer 13

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

Question 14

Trading Account

Answer 14

it shows how the gross profit of a business is calculated

Question 15

Sales Revenue

Answer 15

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

Question 16

Gross Profit

Answer 16

it’s made when sales revenue if greater than the cost of goods sold

Question 17

Income Statement

Answer 17

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

Question 18

Cash Flow Forecast

Answer 18

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

Question 19

Cash Flow Cycle

Answer 19

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

Question 20

Cash Outflows

Answer 20

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

Question 21

Cash Inflows

Answer 21

the sums of money received by a business during a period of time

Question 22

Cash Flow

Answer 22

the cash inflows and outflows over a period of time

Question 23

Micro-Finance

Answer 23

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

Question 24

Revenue Expenditure

Answer 24

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

Question 25

Capital Expenditure

Answer 25

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

Question 26

Working Capital

Answer 26

the finance needed by a business to pay its day to day costs

Question 27

Start-Up Capital

Answer 27

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