Financial Information & Decisions

Question 1

start-up capital

Answer 1

finance needed by new business to pay for essential non-current (fixed) assets before it can begin trading

Question 2

working capital

Answer 2

capital available to a business to pay its day-to-day costs

Question 3

capital expenditure

Answer 3

money spent on non-current (fixed) assets which will last for more than one year

Question 4

revenue expenditure

Answer 4

money spent on day-to-day expenses which do not involve the purchase of a long-term asset

Question 5

internal finance

Answer 5

obtained from within the business itself

Question 6

external finance

Answer 6

obtained from sources outside of and seperate from the business

Question 7

micro-finance

Answer 7

providing financial services to poor people not served by traditional banks

Question 8

crowdfunding

Answer 8

funding a project/venture by raising money from a large number of people who each contribute a relatively small amount

Question 9

cash flow

Answer 9

cash inflows and outflows over a period of time

Question 10

cash inflows

Answer 10

sum of money received by a business during a period of time

Question 11

cash outflows

Answer 11

sum of money paid out by a business during a period of time

Question 12

cash flow cycle

Answer 12

shows the stages between paying out cash for labour, materials and so on, and receiving cash from the sale of goods

Question 13

profit

Answer 13

surplus after total costs have been subtracted from revenue

Question 14

cash flow forecast

Answer 14

prediction of future cash inflows and outflows of a business over a period of time

Question 15

net cash flow

Answer 15

difference between inflows and outflows (between months)

Question 16

closing cash

Answer 16

amount of cash held by the business at the end of each month (next month’s opening cash balance)

Question 17

opening cash

Answer 17

amount of cash held by the business at the start of the month

Question 18

accounts

Answer 18

financial records of a firm’s transactions

Question 19

accountants

Answer 19

professionally qualified people who have responsibility for keeping accurate accounts and for producing the final accounts

Question 20

final accounts

Answer 20

produced at the end of the financial year and give details of the profit or loss made over the year and the worth of the business

Question 21

income statement

Answer 21

financial statement that records the income of a business and all costs incurred to earn that income over a period of time

Question 22

revenue

Answer 22

income to a business during a period of time from the sale of goods/services

Question 23

cost of sales

Answer 23

cost of producing/buying in the goods actually sold by the business during a time period

Question 24

gross profit

Answer 24

made when revenue is greater than the cost of sales

Question 25

trading account

Answer 25

shows how the gross profit of a business is calculated

Question 26

net profit

Answer 26

profit made after all cost have been deducted from revenue (gross profit - overhead costs)

Question 27

depreciation

Answer 27

fall in the value of a fixed asset over time

Question 28

retained profit

Answer 28

net profit reinvested back into a company, after deducting tax and payments to owners

Question 29

statement of financial position

Answer 29

shows the vale of a businesses' assets and liabilities at a particular time

Question 30

assets

Answer 30

items of value which are owned by the business

Question 31

liabilities

Answer 31

debts owed by the business

Question 32

non-current assets

Answer 32

items owned by the business for more than one year

Question 33

current assets

Answer 33

owned by a business and used within one year

Question 34

non-current liabilities

Answer 34

long-term debts owed by the business, repaid over more than one year

Question 35

current liabilities

Answer 35

short-term debts owed by the business, repaid in less than one year

Question 36

capital employed

Answer 36

shareholders' equity plus non-current liabilities and is the total long-term and permanent capital invested in a business

Question 37

liquidity

Answer 37

ability of a business to pay back its short-term debts

Question 38

profitability

Answer 38

the measurement of the profit made relative to either the value of sales achieved or the capital invested in the business

Question 39

illiquid

Answer 39

assets are not easily convertible into cash

Question 40

why is cash flow not the same as profit

Answer 40

because even though all goods have been sold, cash payment has not been received for all of them, only some. customers who buy goods on credit will pay later