Vocabulary Test 3

Question 1

Authorised share capital

Answer 1

The maximum amount that can be legally raised.

Question 2

Bank Overdraft

Answer 2

An agreement between a business and a bank that allows a business to spend more money than it has in its account.

Question 3

Crowdfunding

Answer 3

Where a large number of individuals invest in a business or a project on the internet, avoiding the use of a bank.

Question 4

Capital Gain

Answer 4

The profit made from selling a share for more than it was bought.

Question 5

Debenture

Answer 5

A long-term loan to a business.

Question 6

Equities

Answer 6

Another name for an ordinary share.

Question 7

External Finance

Answer 7

Money raised from outside the business.

Question 8

Issued share capital

Answer 8

Amount of current share capital arising from the sale of shares.

Question 9

Lease

Answer 9

A contract to acquire the use of resources such as property or equipment.

Question 10

Peer-to-peer lending (P2PL)

Answer 10

When individuals lend money to other individuals without prior knowledge of them via the internet.

Question 11

Permanent Capital

Answer 11

Share capital that is never repaid by the government.

Question 12

Secured Loans

Answer 12

A loan where the lender requires security such as property, to provide protection in case the borrower defaults.

Question 13

Share capital

Answer 13

Money introduced into the business through the sales of shares.

Question 14

Unsecured Loans

Answer 14

Where the lender has no protection if the borrower fails to repay the money owed.

Question 15

Venture Capitalism

Answer 15

Providers of funds for small to medium-sized companies that may be considered too risky for other investors.

Question 16

Capital

Answer 16

The money provided by the owner’s of a business.

Question 17

Capital Expenditure

Answer 17

Spending on business resources that can be used repeatedly over a period of time.

Question 18

Internal Finance

Answer 18

Money generated by the business or its current owners.

Question 19

Retained Profit

Answer 19

Profit after tax that is ‘ploughed back’ into the business.

Question 20

Revenue Expenditure

Answer 20

Spending on business resources that have already been consumed or will be very shortly.

Question 21

Sale and leaseback

Answer 21

The practice of selling assets such as property or machinery, and leasing them back from the buyer.

Question 22

Collateral

Answer 22

An asset that can be sold to pay a lender when a loan cannot be repaid.

Question 23

Incorporated business

Answer 23

A business model in which the business and the owner have separate legal identities.

Question 24

Limited Liability

Answer 24

A legal status that means shareholders can only lose the original amount they invested in a business.

Question 25

Long-term Finance

Answer 25

Money borrowed for more than a year.

Question 26

Rights Issue

Answer 26

Issuing new shares to existing shareholders at a discount.

Question 27

Short-term borrowing

Answer 27

Money borrowed for 12 months or less.

Question 28

Undercapitalised

Answer 28

A business that is not raising enough capital when setting up.

Question 29

Unincorporated Business

Answer 29

A business model in which there is no legal difference between the owner and the business.

Question 30

Unlimited Liability

Answer 30

A legal status where the business owners are liable for all business debts.

Question 31

Business Plan

Answer 31

A plan for the development of a business, giving details such as the products to be made, resources needed, and forecasts such as costs, revenues and cash flow.

Question 32

Cash-flow Forecast

Answer 32

The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month.

Question 33

Cash Inflows

Answer 33

The flow of money into a business.

Question 34

Cash Outflows

Answer 34

The flow of money out of a business.

Question 35

Net Cash Flow

Answer 35

The difference between the cash flowing in and the cash flowing out of a business in a given time period.

Question 36

Solvency

Answer 36

The degree to which a business is able to meet its debts when they fall due.