finance Flashcards
1
Q
What are the Short-Term sources of Finance?
A
- Overdraft
- Trade Credit
- Debt Factoring
- Government Grants
2
Q
What are the Medium-Term sources of Finance?
A
- Bank Loans
- Hire Purchase
- Leasing
3
Q
What are the Long-Term sources of Finance?
A
- Mortgages
- Debentures
- Sale and Leaseback agreements
- Share Issue
- Venture Capital
4
Q
What are the possible aids from other organisations?
A
- Chamber of Commerce
- Small Business Advisers
- Trade Associations
- Lottery Grant
- Prince’s Trust
5
Q
What are Cash Budgets?
A
- Budgets are a method of planning for future circumstances
- Budgets are plans that ensure there is enough money to meet commitments
- They control the finance and help the decision-making process
6
Q
What is the Use of Cash Budgets?
A
- To highlight periods when a negative cash/bank balance is expected
- To avoid liquidity problems
- To secure a loan from the bank
- To make comparisons between actual and projected figures
- To analyse managers ability to control and monitor cash flows
7
Q
Why do Cash Flow Problems arise?
A
- Purchasing capital equipment
- High expenses
- Low sales
- Debtors not paying on time
- Allowing customers too long to pay
- Too much money tied up in stock
- Too much borrowing
- High drawings
8
Q
How are Cash Flow problems Resolved?
A
- Offer discounts and promotions to encourage cash sales and reduce stock levels
- Sell any unnecessary fixed assets
- Encourage overdue customers to pay their bills
- Arrange credit with suppliers
- Seek another source of finance (e.g. a partner)
- Sale and Leaseback
- Purchase cheaper products
9
Q
What is the Role of the Finance Department?
A
- Monitors Business Funds - i.e paying bills and maintaining credit control
- Provides information to management - i.e by preparing financial information and paying wages and salaries
- Monitors internal financial information - i.e by monitoring cash flow
- Creates the final accounts (if a chartered accountant)
10
Q
What are the four main Accounting Terminologies?
A
- Revenue — the value of the business’ sales for a period less any goods that have been returned to them
- Opening Inventory — the value of goods held by the business at the start of the financial year
- Purchases — the cost of the goods brought in by the organisation for retail
- Closing Inventory — the value of goods held by the business at the end of the financial year
- Cost of Goods Sold — the cost of the goods sold to the business
- Gross Profit — the difference between the sales and purchases figures. The profit on trading
11
Q
What is the use of an Income Statement?
A
- The top part of this document (the trading section) calculates the gross profit or loss.
- The bottom part of this document calculates the profit or loss for the year.
