Finance Flashcards
Overdraft
A flexible loan with very high interest that allows you to go into a negative balance in your account
What is cash flow?
The money that flows in and out of a business- both in the bank and physical cash
Profit formula
Revenue - costs
Revenue formula (give 2)
Profit + costs
or
Number of units sold x price
What is collateral?
An asset that the bank holds as security for a loan
Give 3 disadvantages of using retained profit as a source of finance
1) Limited amount available
2) Shareholders unhappy with no/low dividends
3) Less available for future use
Give 3 advantages of using retained profit as a source of finance
1) Readily available
2) Liquid asset
3) No interest or repayments
Hire purchase
A type of loan where businesses pay for the asset in instalments over a period of time. The asset is not owned until fully paid.
What is an asset?
Things (of value) owned by a business
Give 3 advantages of using an overdraft as a source of finance
1) All repaid at once
2) Readily available once approved
3) Allows you to go into the negative
Give 3 disadvantages of using an overdraft as a source of finance
1) Very high interest rates
2) Short term only
3) Limited amount to borrow
Net cash flow formula
Cash in - cash out
receipts - payments
Opening balance meaning
Money held by business at the start of the month
Closing balance meaning
Money held by business at the end of the month
How do you find the opening balance?
It is the previous month’s closing balance
