Finance Flashcards
(33 cards)
Describe share issue and give 2pro and con
Selling shares in business to new shareholders
Large sums of finance can be raised
Money doesn’t need repayed
Dividends must be oayed to shatehodkers
Describe debentures and give 2 pro and con
Loan borrowed from individuals through stock market
Paid back over long time
Control of business retained
Intrest MUST be paid annually even if firm makes a loss
Describe mortgage and give pro and 2 con
Large sum borrowed from bank to purchase a building
Paid back over long time
Intrest paid
Can loose property if don’t keep up with payments
Describe venture capatilist and give2 pro and con
Large investment amounts raised
Venture capatilist more likely to invest where banks won’t
Part control of business lost
6 reasons for cash budget
Predict cash surplus
Predict cash deficit
Allow investments back into firm to be planned during surplus
Plan sources of finance during deficits
Measure performance
Set goals for firm to achieve
Describe cash budget
An internal document used to predict what is likely to happen over a period of Time concerning the cahs in a business
Cash budget predicted for upcoming month
Describe cash budget
Opening balance - amount of cash at start of month
Total receipts - total cash received in a month
Cash available - calculated by opening balance + total receipts
Name 2 finnancial statements
Statement of financial position
Income statement
Users of finnancial statements
Stakeholders
What is an income statement
Shows GP and PFTY
What is cost of sales and how’s it calculated
Amount of money spent on selling goods
(Opening inventory + purchases) - closing inventory
What is gross profit and how’s it calculated
Profit made from buying and selling
(Sales revenue - cost of sales)
What re expenses
Costs of running business throgiot the yesr
What is PFTY and how’s it calculated
Profit made after expenses deducted from GP
(GP-expenses)
What is a statement of finnancial position
Shows assets firm owns and liabilities that they owe and the overall value of business
What are NCA
non current assets
Items firm will hold for more than a year
What are CA
Current assets
Assets firm will hold for less than a year
What are CL
Current liabilities
Debts firm will pay back within the year
Working equity
Ability to pay back short term debts (CA-CL)
Net assets employees
Value of NCA + equity figure
NCL
Non current liabilities
Long term debts
Purpose of ratio analysis 4
Compare perform nec with previous year
Compare performance to competitors
Highlights areas of firm that need improved
Highlights trends to aid future decision making
Limitations of ratio analysis4
Ratios historic and not relevant to current position of firm
Ratios don’t take external factors into account
Ratios don’t take internal factors into account
Difficult to find extremely similar competitors to compare ratios with
