Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Business > T6:Finance > Flashcards

T6:Finance Flashcards

(82 cards)

Start Studying
1
Q

What are internal sources of finance?

A

Money from within the business, e.g., retained profit, sale of assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are external sources of finance?

A

Money from outside the business, e.g., loans, overdrafts, share issues.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is retained profit?

A

Profit kept in the business rather than paid to owners – no interest, readily available.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is sale of assets?

A

Selling unwanted or unused items to raise cash.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is a loan?

A

Money borrowed from a bank, repaid with interest over time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a mortgage?

A

A long-term loan used to buy property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is an overdraft?

A

Borrowing from a bank when the account goes below £0 – flexible but expensive.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is trade credit?

A

Buy now, pay later from suppliers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is hire purchase?

A

Paying for goods in instalments over time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is sale and leaseback?

A

Selling an asset and renting it back.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are government grants?

A

Money given to support specific activities – usually doesn’t need repaying.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is cash flow?

A

The money flowing in and out of a business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is cash inflow?

A

Money entering the business (e.g., sales).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is cash outflow?

A

Money going out of the business (e.g., wages, bills).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a cash flow forecast?

A

A plan that predicts future cash inflows and outflows.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a closing balance?

A

The amount of cash available at the end of a period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is an opening balance?

A

The cash available at the start of the period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What problems are caused by poor cash flow?

A

Missed payments, inability to buy stock, and risk of insolvency.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How can cash flow be improved?

A

Delay payments, reduce expenses, increase sales, or get a loan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is profit?

A

When revenue is greater than costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is loss?

A

When costs are greater than revenue.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the formula for profit?

A

Profit = Revenue - Total Costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are fixed costs?

A

Costs that stay the same regardless of output.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are variable costs?

A

Costs that change depending on output.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
How do you calculate total costs?
Total Costs = Fixed Costs + Variable Costs.
26
What is break-even output?
The number of units that must be sold to cover all costs.
27
What is break-even chart?
A graph that shows revenue, costs, and the break-even point.
28
What is margin of safety?
The number of units above break-even being sold.
29
What is average rate of return (ARR)?
The average % return from an investment over time.
30
What is the formula for ARR?
ARR = (Average annual profit / Initial investment) × 100
31
What is an income statement?
Shows profit/loss over a period.
32
What is revenue?
Money from sales.
33
What is gross profit?
Revenue - Cost of Sales.
34
What is net profit?
Gross Profit - Expenses (Overheads).
35
What is the statement of financial position?
Also called balance sheet – shows assets, liabilities and equity.
36
What are assets?
Resources owned by a business.
37
What are liabilities?
What the business owes to others.
38
What is equity?
Owner’s interest in the business after liabilities are paid.
39
What is capital?
Money invested by the owner or shareholders.
40
What are current assets?
Assets expected to be used within a year.
41
What are non-current assets?
Assets used over a long term (e.g., buildings, machinery).
42
What are current liabilities?
Debts due within a year.
43
What are non-current liabilities?
Debts due in more than a year.
44
What is net current assets?
Current assets - Current liabilities.
45
What is net assets?
Total assets - Total liabilities.
46
What is gross profit margin?
Gross Profit ÷ Revenue × 100
47
What is operating profit margin?
Operating Profit ÷ Revenue × 100
48
What is share issue?
Raising finance by selling shares – only available to limited companies.
49
What is crowd funding?
Raising small amounts of money from many people, usually via the internet.
50
What is a government grant?
A non-repayable amount given to businesses for specific purposes.
51
What is internal finance?
Finance from inside the business – retained profit, selling assets.
52
What is external finance?
Finance from outside the business – loans, overdrafts, investors.
53
What is interest?
The cost of borrowing money or the reward for saving.
54
What is the benefit of trade credit?
Allows buying now and paying later, easing short-term cash flow.
55
What is net cash flow?
Cash inflows - cash outflows.
56
What are consequences of negative cash flow?
Missed payments, damaged reputation, risk of closure.
57
How can a business improve cash inflow?
Increase sales, reduce credit period, borrow funds.
58
How can a business reduce cash outflow?
Delay payments, reduce overheads, negotiate better terms.
59
What is gross profit?
Revenue minus cost of goods sold.
60
What is operating profit?
Gross profit minus operating expenses (overheads).
61
What is net profit?
Operating profit minus tax and interest.
62
What is profit margin?
Percentage of revenue that becomes profit.
63
What is profit maximisation?
Trying to make the most profit possible by controlling costs and increasing sales.
64
What is retained profit?
Profit kept in the business to reinvest rather than distributed to owners.
65
What is break-even used for?
To determine how many units must be sold to cover all costs.
66
Why is margin of safety important?
It shows how far sales can fall before a loss is made.
67
What are the limitations of break-even analysis?
Assumes all output is sold, doesn't account for price changes or variable cost fluctuations.
68
What does ARR show?
The profitability of an investment over time.
69
What are the advantages of using ARR?
Simple to calculate and compare options.
70
What are the disadvantages of using ARR?
Ignores cash flow timing and may not reflect risk.
71
What are fixed assets?
Long-term assets used in operations, such as buildings and equipment.
72
What is capital employed?
Total capital used to run the business, including debt and equity.
73
What is equity?
The value of the owner's share in the business.
74
What is net assets?
Total assets - total liabilities; a measure of the business’s value.
75
Why are financial statements important?
They show business performance and support decisions by investors, lenders, and managers.
76
What is overdraft?
Borrowing from the bank when your account goes below £0.
77
What is liability?
A financial obligation the business must repay.
78
What are fixed costs?
Costs that remain constant regardless of output.
79
What are variable costs?
Costs that increase as output rises (e.g., materials).
80
What is revenue?
Income from sales before any costs are taken away.
81
What is raising finance?
Getting funds to start or grow a business.
82
What is loss?
When expenditure is greater than income.

Business (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions