Business Finance

Question 1

Asset

Answer 1

Is any item owned by a business that can generate an income for the enterprise

Question 2

Capital

Answer 2

Is the money invested into a business either by its owners or by organisations such as banks

Question 3

Non current assets

Answer 3

Are assets that a business expects to hold for one year or more eg vehicles

Question 4

Short term sources of finance

Answer 4

Are needed for a limited period of time, normally less than a year

Question 5

Long term sources of finance

Answer 5

Are those hat are needed over a longer period of time, usually over a year

Question 6

Insolvency

Answer 6

Exists when a business debts exceed the assets available to pay them

Question 7

Liabilities

Answer 7

Refers to the money owed by a business to individuals, suppliers and banks

Question 8

Working capital

Answer 8

Is the cash a business has for its day to day spending

Question 9

Current assets

Answer 9

Are items owned by a business that can be readily turned into cash. Eg cash, money owed by customers and stocks

Question 10

Trade payables

Answer 10

Is the amount of money owed by a business to its suppliers for goods and services that have been received but not yet paid for

Question 11

Trade receivables

Answer 11

The amount of money owed by a business customers for products that have been supplied for but not yet paid for

Question 12

Revenue expenditure

Answer 12

Refers to the purchase of items as fuel and raw materials that will be used up within a short space of time

Question 13

Capital expenditure

Answer 13

Is the spending by a business on non current assets such as premises, production equipment and vehicles

Question 14

A statement of financial position

Answer 14

Is a financial statement that records the assets and liabilities of a business on a particular day at the end of an accounting period ( balance sheet )

Question 15

Income statement

Answer 15

Is a financial statement showing a business sales revenue over a trading period and all the relevant costs incurrent to generate that revenue

Question 16

Internal sources of finance

Answer 16

Ones that exist within the business

Question 17

External sources of finance

Answer 17

Is an injection of funds into the business from individuals, other businesses or financial institutions

Question 18

Trade credit

Answer 18

Is a period of time offered by suppliers of goods and services before payment is to be made

Question 19

Bank Loan

Answer 19

Is an amount of money provided to a business for states purpose in return payment in the form of interest charges

Question 20

Venture capital

Answer 20

Is funds that is advanced to businesses which are thought to be relatively high risk

Question 21

Debt factoring

Answer 21

When a business sells its account receivables to a third party to immediately provide an instant source of cash flow

Question 22

Micro finance

Answer 22

Is the provision of financial services for poor and low income clients

Question 23

Crowdfunding

Answer 23

Is a source of finance that entails collecting relatively small amounts of money from a large number of supports ( a crowd )

Question 24

Government grant

Answer 24

Is a sum of money given to entrepreneurs or businesses for a specific purpose

Question 25

Cash

Answer 25

Is a businesses most liquid asset, notes and coins as well as funds held in a businesses bank accounts

Question 26

Cash flow forecast

Answer 26

Is a document that records anticipated inflow and outflows of cash over some future period ( normally a year )

Question 27

Costs

Answer 27

Are expenses that a business has to pay to engage in its trading activities

Question 28

Revenue

Answer 28

Is the income a business receives from selling its good or services

Question 29

Direct costs

Answer 29

Can be related to the production of a particular product and vary directly with the level of output WAGES / direct labour

Question 30

Indirect costs

Answer 30

Are overheads that cannot be allocated to the production of a particular product and relate to the business as a whole RENT,

Question 31

Full costing

Answer 31

Allocates all the costs of production for the whole business. Therefore these costs are absorbed into each output unit ( Absorption costing )

Question 32

Contribution

Answer 32

Can be defined as the difference between sales revenue and variable costs of production

Question 33

Break even

Answer 33

Is the level of production or output at which a business sales or total revenue is exactly equally to the cost of production

Question 34

Profits

Answer 34

Are the amount by which revenue exceeds costs, money gained after sales

Question 35

Contribution costing

Answer 35

Calculates the cost of a product solely on the basis of variable costs, thus avoiding the need to allocate fixed costs

Question 36

Marginal costs

Answer 36

Is the extra cost resulting from producing one additional unit of output,

Question 37

Cost plus pricing

Answer 37

Is the process of establishing the price of a product by calculating its cost of production and then adding an amount which is profit

Question 38

Special order decisions

Answer 38

Occurs when a manager have to decide whether or not to accept unusual customer orders

Question 39

Margin of safety

Answer 39

Measures the quantity by which a firms current level of sales exceeds the level of output necessary to break even

Question 40

Incremental budgeting

Answer 40

Is a process where budget figures are minor changes from the preceding periods budgeted or actual data

Question 41

Flexible budget

Answer 41

Is a budget that is designed to change along with the sales volume or production sales

Question 42

Budget holders

Answer 42

Responsible for the use and management of a particular budget

Question 43

Zero budget

Answer 43

Exists when a budget are automatically set at zero and budget holders have to argue their case to receive any funds