29. Glossary Flashcards
Start up capital
Definition
the capital needed by an entrepreneur to set up a business.
Working capital
Definition
the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers.
Shirt term finance
Definition
money required for short periods of time of up to one year.
Long term finance
Definition
money required for more than one year.
Liquidity
Definition
the ability of a business to pay its short-term debts.
Administration
Definition
when administrators manage a business that is unable to pay its debts with the intention of selling it as a going concern.
Bankruptcy
Definition
the legal procedure for liquidating a business (or property owned by a sole trader) which cannot fully pay its debts out of its current assets.
Liquidation
Definition
when a business ceases trading and its assets are sold for cash to pay suppliers and other creditors.
Current assets
Definition
assets that either are cash or likely to be turned into cash within 12 months (inventory and trade receivables or debtors).
Current liabilities
Definition
debts that usually have to be paid within one year.
Capital expenditure
Definition
the purchase of non-current assets that are expected to last for more than one year, such as buildings and machinery.
Revenue expenditure
Definition
spending on all costs and assets other than non-current assets, which includes wages, salaries and inventory of materials.
Revenue expenditure
Definition
spending on all costs and assets other than non-current assets, which includes wages, salaries and inventory of materials.
Retained earnings
Definition
profit after tax retained in a company rather than paid out to shareholders as dividends.
Internal sources
Definition
raising finance from the businesss own assets or from profits left in the business (retained earnings).
External sources
Definition
raising finance from sources outside the business, for example banks.
Non-current assets
Definition
assets kept and used by the business for more than one year.
Overdraft
Definition
credit that a bank agrees can be borrowed by a business up to an agreed limit as and when required.
Factoring
Definition
selling of claims over trade receivables (debtors) to a specialist organisation (debt factor) in exchange for immediate liquidity.
Hire purchase
Definition
company purchases an asset and agrees to pay fixed repayments over an agreed time period. The asset belongs to the purchasing company once the final payment has been made.
Leasing
Definition
obtaining the use of an asset and paying a leasing charge over a fixed period, avoiding the need to raise long-term capital to buy the asset. The asset is owned by the leasing company.
Long term loans
Definition
loans that do not have to be repaid for at least one year.
Debentures
Definition
long-term bonds issued by companies to raise debt finance, often with a fixed rate of interest.
Share capital
Definition
permanent finance raised by companies through the sale of shares.
