Unit 3 - Accounts and Finance Flashcards
(88 cards)
average rate of return ARR
calculates the average annual profit of an investment project
acid test ratio
liquidity ratio that measures the ability of a firm to meet its debts within the next 12 months, but it ignores stock because not all stock can be easily turned into cash in the short-run
appropriation account
final section of the P&L account and shows how the profits after tax are distributed between the owners and as retained profits
assets
items with a monetary value that belong to a business; they can either be fixed assets (e.g. machinery, tolls, buildings) or current assets (e.g. cash, stock, debtors)
book value
value of an asset as shown on a balance sheet
business angels
wealthy entrepreneurs who risk their own money in small to medium sized businesses that have high growth potential
capital employed
value of all long-term sources of finance for a business, e.g. bank loans, share capital, reserves
cash
actual money a business has received from selling its products and exists in form of cash in hand (cash held in the business) or cash at bank (cash held in a bank account)
cash flow
movement of money into and out of an organisation; cash inflows mainly come from sales revenue, cash outflows mainly from expenditures
cash flow forecast
financial document that records the actual cash inflows and outflows for a business over a specified trading period
closing balance
value of cash left in a business at end of the month, as shown in its cash flow forecast
costs of goods sold COGS
(= variable costs = direct costs) costs that are directly linked to the production, e.g. costs of raw material
creditors
individuals or organisations that have sold goods or services on credit and will collect this money within the next 12 months
contingency fund
reserve budget that is set aside for emergency and back-up use
current assets
resources owned by a business and intended to be used within the next 12 months, e.g. cash, debtors, stocks
current ratio
efficiency ratio that shows the ability of a firm to meet its debts within the next 12 months
debentures
type of long-term loan with fixed annual interest payments which are repayable on maturity
debt factoring
financial service whereby a factor (such as the bank) collects debts on behalf of other businesses, in return for a fee
debtors
customers who have purchased goods or services on credit, so owe the business money which is collected within the next 12 months
depreciation
fall in the value of fixed assets, due to wear and tear or out of fashion
expenses
spending in the working capital cycle of a business, e.g. salaries, rent, advertising
external sources of finance
getting funds from outside the organisation, e.g. overdrafts, loans
final accounts
annual financial statements that all limited companies are legally obliged to report; these include balance sheet, trading account, profit and loss account
fixed assets
resources owned by a business and not intended for sale within the next 12 months, e.g. land, machinery