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Finance And Economics > Finance, Economics And Business > Flashcards

Finance, Economics And Business Flashcards

1
Q

What does finance do and how

A

Facilitates trade
By getting money from those who have it to those who can make good use of it

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2
Q

What is the time value of money

A

Idea that £1 today is worth more than £1 tomorrow

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3
Q

Future value symbol

A

F

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4
Q

Present value symbol

A

Pv

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5
Q

Risk free risk of return symbol

A

R

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6
Q

Number of periods of investment symbol

A

N

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7
Q

To the power of symbol

A

) ^

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8
Q

Future value formula

A

Pv * ((1+r)^n)

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9
Q

Present value formula

A

F / ((1+r)^n)

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10
Q

Use future value and present value to provide time value of money

A

F = 1* ((1+0.01)^1) = 1.01
Pv = 1 / ((1+0.01) ^ 1) = 0.91

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11
Q

What’s accounting concerned with

A

Counting/measuring, reporting

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12
Q

Accounting equation, what is it also known as

A

Assets - liabilities = equity
Balance sheet

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13
Q

What’s economics concerned with

A

Why things happen the way they do

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14
Q

Economics definition

A

The theories, principles, and models that deal with how the market process works

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15
Q

Behaviour characteristics of neo-classical economic models and explain each

A

Ppl behave rationally (logically)
Maximise utility
Act independently w full info

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16
Q

Explain maximise utility

A

Ppl will behave logically to maximise utility

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17
Q

Explain act independently w full info

A

don’t copy what everyone is doing, will rationally and logically assess all info available and will have understanding of all available info, in order to maximise health, wealth or happiness etc

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18
Q

Define utility

A

health, happiness, money etc

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19
Q

What’s neo-classical economics

A

Focuses on supply and demand as driving forces behind production, pricing and consumption of goods and services

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20
Q

Is neo-classical economics ceteris paribus

A

Yes

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21
Q

Ceteris paribus meaning

A

All else being equal

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22
Q

4 factors of production

A

Natural resources
Labour
Capital
Entrepreneurship

23
Q

What’s natural resources

A

Land or materials

24
Q

What’s labour

A

Human input

25
Q

What’s capital

A

Human made products eg equipment or factories

26
Q

What’s entrepreneurship

A

Capacity and willingness to develop, organise and manage a business venture alongside any of its risks in order to make profit

27
Q

Resource characteristics of neo-classical economic models. 3

A

Property rights
Scarcity of resources
Opportunity costs

28
Q

What’s property rights

A

Ability to own and reuse resources

29
Q

Explain scarcity of resources

A

Limited resources to satisfy unlimited wants

30
Q

Explain opportunity costs

A

Scarcity of resource inevitably leads to benefits of one course of action being sacrificed in order to peruse a different one

31
Q

Type of business legal structures. 5

A

Sole trader/ sole proprietor
Partnership
Private limited company
Public limited company (plc)
Charity

32
Q

What’s a sole trader/sole proprietor

A

Sole owners of business who direct business affairs, bears its risks and losses and takes profits and benefits

33
Q

What happens if sole trader gets into debt

A

Unlimited liability so may have to use personal assets such as house or car to repay debt

34
Q

Who may be a sole trader

A

A plumber

35
Q

What’s a partnership
Who may be a partnership

A

business w 2 or more owners who agree to direct affairs, bear risks and losses, and take profits and benefits) eg often an accountancy firm

36
Q

What’s a private limited company

A

incorporated business where owners have limited access to profits and limited personal liabilities for losses

37
Q

Difference in private and public limited company

A

Private can’t openly trade on stock market but public can

38
Q

What does incorporated mean

A

busi has its own legal identity which is separated from owners of busi, so incorporated busi getting into debt means owner won’t have to use personal assets to repay debt it’ll only use busi assets

39
Q

Who may be a private limited company

A

An nba team

40
Q

What’s a public limited company
Eg

A

incorporated businesses where owner have limited access to profits through payments of dividends but also limited personal liability for losses so are also incorporated
Eg adidas

41
Q

What does plc stand for

A

Public limited company

42
Q

What’s a charity

A

non profit org whose primary objectives are philanthropy and social well-being

43
Q

Sources of investment. 5

A

Personal loan
Private loan
Private investment
Public investment
Grant

44
Q

Personal loan

A

owner or friend may lend money that has to be paid back at some point alongside interest

45
Q

Private loan
Eg

A

Money lended that’s to be paid back at some point w interest, usually from a financial institution

46
Q

Private investment

A

occurs in privateLCs where selected individuals are given oppor to buy ownership rights of busi in return for share of busi profits

47
Q

Public investment
Eg

A

used in public LCSs where any individual can buy ownership rights of busi in return for share of busi profits via stock market, eg investment from dragons den

48
Q

What’s a grant

A

payments provided by either gov or private org for specific purpose such as training, expansion, r&d etc

49
Q

Factors influencing investment decisions. 4

A

Level of investment
Level of return
Level of risk
Timing of return

50
Q

Npv formula

A

Pv - i

51
Q

Npv definition and what it tells you

A

difference between present value of cash inflows and present value of cash outflows over period of time, it tells you if an investment will be profitable down the line, demonstrates if investment returns more than required rate of return of investment

52
Q

Is it true that the price of publicly traded shares in a company only changes when the company releases its quarterly financial results.

A

No

53
Q

Is it true that financial theory assumes £1 today is worth less than £1 tomorrow as there is a risk you may lose some of that £1 through risky investments.

A

No

54
Q

What does i stand for

A

Initial investment

Finance And Economics (11 decks)

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