unti 5 - finance

Question 1

break even

Answer 1

the amount a business must sell to earn enough revenue to just cover its costs so it doesn’t make a profit or loss

Question 2

why do businesses need finance

Answer 2

recruitment, marketing , running the business, funding expansion, establishing a new business

Question 3

overdraft

Answer 3

an arrangement with a bank that a business can spend more money than it has in its account

Question 4

retained profit

Answer 4

profit that is not distributed to shareholders as dividend

Question 5

sale of assets

Answer 5

items sold by the business

Question 6

taking on a partner

Answer 6

adding a new partner who contributes some new captial

Question 7

trade credit

Answer 7

when the business buys goods to sell and does not need to pay the supplier for a period of time ( often 30 days )

Question 8

crowdfunding

Answer 8

money raised through an appeal to the public who are supporters of the business

Question 9

loan

Answer 9

a sum of money borrowed for a stated period at an agreed rate of interest

Question 10

share issue

Answer 10

money raised from investors by selling new shares

Question 11

external finance

Answer 11

finance raised from sources outside the business, eg overdraft, trade credit, loan, crowdfunding and share issues

Question 12

internal finance

Answer 12

finance raised within the business. eg - owners captial, retained profit and sale of assets

Question 13

reveue

Answer 13

money received from sales

Question 14

total costs

Answer 14

addition of total fixed and total variable costs

Question 15

loss

Answer 15

when the cost of a business are greater than the revenue it makes

Question 16

average rate of return

Answer 16

a method of mesuring and comparing the profitability of an investment over the lifetime of the investment

Question 17

break even quantity

Answer 17

the amount a business must sell to earn enough revenue to just cover its costs so it does not make a profit or a loss

Question 18

forecast

Answer 18

prediction

Question 19

break even forecast

Answer 19

prediction about the break even quantity based on estimates of future sales revenue and costs

Question 20

liquidity

Answer 20

ability of a business to pay its short term debts

Question 21

cash flow forecast

Answer 21

statement showing the expected flow of money into and out of a business over a period of time

Question 22

negative cash flow

Answer 22

a forecast that there will be more cash going out of the business then going in

Question 23

positive cash flow

Answer 23

forecast that more cash is coming into the business than going out

Question 24

opening balance

Answer 24

amount of cash available at the beginning of the month. it is the closing balance for the previous month

Question 25

closing balance

Answer 25

amount of cash left at the end of the month. it becomes the opening balance for the next month