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Business S4 > Finance > Flashcards

Finance Flashcards

1
Q

How is word used in finance

A

To create an invoice to send to customers

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2
Q

How is database used in finance

A

To store customer info about money paid/ money owed

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3
Q

How is PowerPoint used in finance

A

To present a summary of financial info to shareholders at an annual general meeting

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4
Q

How is the internet used in finance

A

To compare loans terms and online banking

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5
Q

How is online banking used in finance

A

To view account balance at any time of day

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6
Q

How is excel used in finance

A

Create an income statement/ cash budget and to create charts of sales figures

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7
Q

What is a bank overdraft

A

An agreement to use more money than you have in your account

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8
Q

What is the advantage of a bank overdraft

A

It is easy to organise with a phone call or in app

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9
Q

What is the disadvantage of a bank overdraft

A

Interest is charged on a daily rate

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10
Q

What is trade credit

A

Receiving raw materials and paying for them at a later date

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11
Q

What is an advantage of trade credit

A

It helps cash flow as you don’t need to pay for materials straight away

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12
Q

Disadvantage of trade credit

A

Lose cash discount

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13
Q

What are the 5 purposes of a cash budget

A

Identify periods of deficit
Allows time to take corrective action
Helps set targets, plan ahead and can motivate employees
Helps managers make decisions by comparing actual figures to budgeted and monitors progress
Identifies periods of surplus to plan investments

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14
Q

What is cash budget

A

A financial document prepared by a business to help manage cash flow (money in/ money out) (forecast)

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15
Q

What is a grant

A

Finance from the government that does not need repaid

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16
Q

What is the advantage of a grant

A

Does not need repaid

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17
Q

What is the disadvantage of a grant

A

Criteria needs to be met

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18
Q

What is a share issue

A

When an invited shareholder invests money into an LTD

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19
Q

Advantage of a share issue

A

No interest or repayments

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20
Q

Disadvantage of share issue

A

Profits have to be shared

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21
Q

What are personal savings

A

Owners own finance saved up

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22
Q

Advantage of personal savings

A

Doesn’t need repaid

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23
Q

Disadvantage of personal savings

A

May be limited funds available

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24
Q

What are the 7 purposes of an income statement

A

Calculate gross profit
Calculate expenses
Calculate profit for the year
Legal purposes (LTD)
Calculate tax
Show potential investors
Analyse performance

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25
Q

What is sales revenue

A

Income made from selling

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26
Q

What is cost of sales

A

Cost of raw materials

27
Q

What is gross profit

A

Profit made from trading
(Sales revenue- cost of sales)

28
Q

What are expenses

A

Running costs eg wages

29
Q

What is profit for the year

A

Final profit after deducting expenses
(Gross profit- expenses)

30
Q

What is each letter?
A 1,000
Less: b - 800

      C.                   200

Less: d
10
20
E 30
£170

A

A sales revenue
B cost of sales
C gross profit
D expenses
E profit for the year

31
Q

What is a bank loan

A

Finance borrowed and repaid with interest

32
Q

Advantage of bank loan

A

Repaid in instalments

33
Q

Disadvantage of bank loan

A

Repaid with interest

34
Q

What is a mortgage

A

Finance borrowed to purchase property

35
Q

Advantage of mortgage

A

Large amount can be raised

36
Q

Disadvantage of mortgage

A

Property is secured against loan

37
Q

What is a hire purchase

A

Buying an asset and paying in monthly instalments

38
Q

Advantage of hire purchase

A

Spreads cost as paid over time

39
Q

Disadvantage of hire purchase

A

Asset not owned until final payment

40
Q

What are the 6 benefits of a spreadsheet

A

Formulas can be used- less human error
Formulas can be replicated- saving time entering data
Figures can easily be converted to charts- identify trends
Can be saved and edited at a later date
Formulas automatically update figures- easy to make changes
Templates can be created to standardise

41
Q

What is an opening balance

A

Cash at the start of the financial period

42
Q

How do you calculate the closing balance

A

Opening balance + incomes - expenditures = closing balance

43
Q

What are incomes (receipts)

A

Any cash received by the business

44
Q

What are expenditures (payments)

A

Any cash spend by the business

45
Q

What is the closing balance

A

Cash at the end of the financial period

46
Q

What is a deficit

A

Income is less than expenditure

47
Q

What is a surplus

A

Income is greater than expenditures

48
Q

What is the solution to rent increasing

A

Move to a cheaper premises

49
Q

What is the solution to wages increasing

A

Reduce the amount of overtime hours

50
Q

What is the solution to a deficit being forecast

A

Arrange a bank loan/ overdraft

51
Q

What is the solution to sales decreasing

A

Use advertising or special offers

52
Q

What is the solution to a new car/ van being bought

A

Use hire purchase

53
Q

What is the solution to purchases increasing

A

Find a cheaper supplier

54
Q

What are the 4 things to look for when identifying problems in cash budgets

A

Falling incomes
deficits
Capital expenditure
Increasing expenditures e.g purchases, wages

55
Q

What are fixed costs

A

Costs that remain the same, do not change with output e.g rent

56
Q

What are variable costs

A

Costs that change directly with the volume of output e.g raw materials

57
Q

How to calculate total cost

A

Fixed costs + variable costs

58
Q

What is sales revenue and how do you calculate it

A

Income from selling goods
Quantity sold x selling price

59
Q

What is the break-even point

A

The point at which no profit and no loss is made
Total revenue= total cost

60
Q

What is profit

A

Revenue is greater than total costs

61
Q

What is loss

A

Total costs are greater than revenue

62
Q

What are the three different lines on a break even chart

A

Line increase from origin- sales revenue
Horizontal line- fixed costs
Line starting where fixed costs starts and increasing- total costs

63
Q

What are the x and y axis on the break even chart

A

X- quantity (units)
Y- revenue/ costs (£)

64
Q

Where is the BEP on a break even chart

A

Where total costs and sales revenue cross

Business S4 (5 decks)

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