Finance Flashcards
(25 cards)
What are the three reasons businesses need finance
Starting business, Running business, Expanding business
What are the three short term sources of finance
Overdraft, Trade credit, Factoring (sale of assets)
What are the six long term sources of finance
Owners Savings, bank loans, debentures, mortgage, hire purchase, government grants
What is Factoring
Where firms sell their invoices to a factor such as a bank
What is a Debenture
Loans made to a company
What are internal sources of finance
Sources of finance from within the business
What are external sources of finance
Sources of finance from outside the company
What is a creditor
Individual or business that has lent money to another business and is owed money
What is a debtor
Individual or business that has borrowed money and owes money
What is interest
Cost of borrowing and reward for lending
What is revenue
Amount of money a business earns over a period of time
What is the formula for revenue
Price x Quantity
What are costs
Expenses involved in making a product
What are variable costs
Costs that vary as the output varies
What are fixed costs
Costs that stay the same regardless of product output
What is profit
Surplus left from revenue after paying all costs
What is the profit/loss formula
Total revenue - Total costs
What is loss
When the total revenue is not enough to cover all costs
What is Cash flow
Flow of money in and out of the company
What is net cash flow in
Difference between cash flow in and cash flow out
When is a business insolvent
Business runs out of cash and can’t pay its suppliers or workers
What is break even
When a company makes neither a profit or loss
What is the break even point
When total revenue equals total costs
What is the break even formula
Fixed Costs / Contribution per unit
