Finance Flashcards
(53 cards)
what is the definition of finance?
money raised and used by a bsuiness
what is the definition of finance function?
refers to the finance department, which is usually found in larger businesses
what is the definition of financial information?
includes details of profit, loss, cashflow, break-even, profit margins and average rate of return
what is the role of the finance function?
calculating sales revenue and production costs as well as forecasting cash flow
what are the five needs for finance?
establishing a new business, funding expansion, recruitment, marketing, running the business
why do establishing businesses need finance?
it needs to buy items before it produces or sells something
why do businesses need finance for expansion?
may need to pay for a larger factory, shop or office
why do businesses need finance for recruiting?
it costs money to advertise jobs and select workers
what is the definition of an overdraft?
an arrangement with the bank that a business can spend more money than it has in its account
what is the definition of the owners’ capital?
money from savings put into the business by the owners
what is the definition of retained profit?
profit that is not distributed to shareholders as dividends
what is the definition of sale of assets?
items sold by the business
what is the definition of taking on a partner?
adding a new partner who contributed some new capital
what is the definition of trade credit?
when the business buys goods to sell and does not need to pay the supplier for a period of time - often 30 days
what are the advantages and disadvantages of owners’ capital?
no need to repay and no interest
owners risks savings or may not have savings
what are the advantages and disadvantages of retained profit?
no need to repay and no interest
businesses may not have made profits
what are the advantages and disadvantages of sale of assets?
good if selling of old equipment or stock, no need to repay, no interest
may be difficult and take time
what are advantages and disadvantages of an overdraft?
meets short term cash flow problem
interest is charges for each day the money is owed, which can be expensive
what are the advantages and disadvantages of trade credit?
the business may have goods to sell before paying them
goods must be paid for even if they do not sell, interest is charged if payment is late
what are the advantages and disadvantages of taking on a new partner?
may bring new skills
share on the profits
what is the definition of crowdfunding?
money raised through an appeal to the public who are supporters of the business
what is the definition of a loan?
a sum of money borrowed for stated period at an agreed rate of interest
what is the definition of a share issue?
money raised from investors by selling new shares
what are the advantages and disadvantages of a loan?
repayment is in fixed sums
interest must be paid
