Unit 5 - Financial information and decisions

Question 1

Start-up capital

Answer 1

is the finance needed by a new business to pay for essential non-current & current assets before it can begin trading

Question 2

Working capital

Answer 2

Is the finance needed by a business to pay for its day-to-day activities

Question 3

Capital expenditure

Answer 3

is money spent on non-current assets which will last for more than one year

Question 4

Revenue expenditure

Answer 4

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

Question 5

Internal finance

Answer 5

is obtained from within the business itself

Question 6

External finance

Answer 6

is obtained from sources outside of and separate from the business

Question 7

Micro-finance

Answer 7

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

Question 8

Crowdfunding

Answer 8

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

Question 9

The cash flow of the business

Answer 9

is the cash inflows and outflows over a period of time

Question 10

Cash inflows

Answer 10

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

Question 11

Cash outflows

Answer 11

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

Question 12

Cash outflows

Answer 12

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

Question 13

cash flow cycle

Answer 13

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

Question 14

Profit

Answer 14

is the surplus after total costs have been subtracted from revenue

Question 15

A cash flow forecast

Answer 15

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

Question 16

Net cash flow

Answer 16

is the difference , each month, between inflows and outflows

Question 17

Closing cash (or bank balance)

Answer 17

is the amount of cash held by the business at the end of each month. This becomes next month’s opening cash balance.

Question 18

Opening cash (or bank balance)

Answer 18

is the amount of cash held by the business at the start of the month

Question 19

Working capital

Answer 19

is the finance needed by a business to pay for its day-to-day expenses

Question 20

Accounts

Answer 20

are the financial records of a firm’s transactions

Question 21

Final accounts

Answer 21

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

Question 22

Income statement

Answer 22

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

Question 23

Revenue

Answer 23

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

Question 24

Cost of sales

Answer 24

is the cost of producing or buying in the goods actually sold by the business during a time period

Question 25

Gross profit

Answer 25

is made when revenue is greater than the cost of sales

Question 26

Trading accounts

Answer 26

shows how the gross profit of a business is calculated

Question 27

Net profit

Answer 27

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

Question 28

Depreciation

Answer 28

is the fall in the value of a fixed asset over time

Question 29

Retained profit

Answer 29

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

Question 30

Statement of financial position

Answer 30

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

Question 31

Assets

Answer 31

are those items of value which are owned by the business. They may be non- current ( xed) assets or currents assets

Question 32

Liabilities

Answer 32

are debts owed by the business. They may be non-current liabilities or currents liabilities

Question 33

Non-current assets

Answer 33

are items owned by the business for more than one year

Question 34

Current assets

Answer 34

are owned by the business and used within one year

Question 35

Non-current liabilities

Answer 35

are long-term debts owed by the business, repaid over more than one year

Question 36

Current liabilities

Answer 36

are short-term debts owed by the business, repaid in less than one year

Question 37

Capital employed

Answer 37

is shareholders’ equity + non- current liabilities and is the total long-term and permanent capital invested in a business

Question 38

Liquidity

Answer 38

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

Question 39

Pro tability

Answer 39

is the measurement of the pro t made relative to either the value of sales achieved or the capital invested in the business

Question 40

If a Business is Liquid

Answer 40

means that assets are not easily convertible into cash