Unit 5 Key Terms

Question 1

cash flow

Answer 1

the total amount of money being transferred in and out of a business

Question 2

gross profit

Answer 2

the profit made after deducting producing and selling costs

Question 3

operating profit

Answer 3

profit made from trading

Question 4

revenue

Answer 4

total amount of income from sales

Question 5

fixed costs

Answer 5

costs that don’t change directly with level of output

Question 6

variable costs

Answer 6

costs that change directly with level of output

Question 7

budget

Answer 7

a financial plan for the future

Question 8

variance

Answer 8

comparison between budget and actual finance figures achieved

Question 9

break even

Answer 9

when total revenue is equal to total costs

Question 10

margin of safety

Answer 10

difference between the actual level of sales and the break even point

Question 11

contribution

Answer 11

difference between sales and variable costs

Question 12

overdraft

Answer 12

when bank allows business to overspend its current account up to an agreed limit and for stated time period

Question 13

retained profit

Answer 13

profit that is reinvested in the business rather than distributed to shareholders

Question 14

debt factoring

Answer 14

when factoring company buys the right to collect the money from credit sales of a business (selling off debt to 3rd party)

Question 15

venture capital

Answer 15

finance provided to small or medium sized businesses that seek growth but are deemed risky by typical share buyers

Question 16

bank loan

Answer 16

business borrows a fixed amount of money from bank and pays it back over a period of time in regular installments, and pay interest on it

Question 17

crowd funding

Answer 17

money raised from ‘sponsors’ usually by advertising idea on crowd fund raising website

Question 18

profitability

Answer 18

the degree to which a business yields profit or financial gain