7&8

Front 1

It is more usually regarded as an incorporated association which has a legal identity distinct from its owners and those who participate in its activities.

Back 1

Company

Front 2

It is `the relation which subsists between persons carrying on a business in common with a view of profit'.

Back 2

Partnership

Front 3

It is required to form or expand the long-term capital of the firm. It will be used to purchase fixed assets such as buildings, plant, and equipment, the durable (fixed) assets of the firm.

Back 3

Long-term finance

Front 4

It is a company limited by shares or limited by guarantee and having a share capital, being a company.

Back 4

Public company

Front 5

This is the simplest form of business unit or firm. As the title implies, the owner of the firm is the firm, at least from the legal viewpoint.

Back 5

Single-person enterprise

Front 6

It has a par, face or nominal value which represents the ownership contribution of each share.

Back 6

Shares

Front 7

It is `characterized by oligopolistic partners', which suggests particular features of the organizations involved and their behaviour, especially due to their market power.

Back 7

Joint ventures

Front 8

(also called abnormal, monopoly or excess) profit is profit earned in excess of normal profit and may be a short-period or long period situation depending upon the type of competition prevailing.

Back 8

Supernormal profit

Front 9

These are fixed-interest securities which are issued by a company in return for a long-term loan.

Back 9

Debentures

Front 10

It is classified into three types by time period of the requirement; short, medium, and long.

Back 10

Capital

Front 11

It is that level of surplus of income over expenditure which accrues to the entrepreneur over the long period and is the minimum return required to retain the investment in that use.

Back 11

Normal profit

Front 12

It is profit retained within the firm instead of being distributed to the owners

Back 12

Retained earnings

Front 13

It is a bookkeeping and costing exercise by which the initial cost of an asset is written off over its useful life, i.e. the value of the asset is reduced by a predetermined amount each year.

Back 13

Depreciation

Front 14

It is the granting of ownership of commodities prior to payment for them.

Back 14

Credit

Front 15

FORMULA:Current price of a share

Back 15

Front 16

It is the most indeterminate of the three categories, being regarded by some as akin to short-term and by others as akin to long-term capital.

Back 16

Medium-term capital

Front 17

This is a procedure in which a specialist organization buys the debt owed to the firm at a discount, thereby providing the firm with short-term capital and reduced risk.

Back 17

Debt factoring

Front 18

It is a persistent raising of the price level in an economy relative to money incomes

Back 18

Inflation

Front 19

It is this type of capital which is required for day-to-day activities.

Back 19

Short-term capital

Front 20

It is, primarily, a market where various securities (e.g. government stocks, shares, debentures) are bought and sold.

Back 20

Stock exchange

Front 21

It is influential upon the cost of capital by two means: first, through the system of corporation tax and, second, through income tax levied on individuals in respect of both earned and, more importantly in this context, unearned income.

Back 21

Taxation

Front 22

It is a process whereby a customer of a commercial bank is permitted to overdraw on that account (to draw in excess of any positive balance) up to an agreed limit for a prescribed period.

Back 22

Bank overdrafts

Front 23

It is the return (average over a period or at a particular time) on the investment compared with its purchase price.

Back 23

Yield

Front 24

It is a reduction in the price to be paid for a commodity, usually applicable if payment is made by the purchaser within a prescribed period from date of invoice or date of delivery (cash discount) or applicable because the purchaser is a business within a particular trade (trade discount)

Back 24

Discount

Front 25

These are considered to be those costs which must be borne even if there is no output from the firm. They are fixed costs.

Back 25

Overheads

Front 26

It considers the cost of the requisite capital from the possible sources and is, obviously, likely to produce a cost in excess of the firm's average cost of capital due, inter alia, to the additional risks likely to be involved.

Back 26

Marginal cost of capital

Front 27

FORMULA:Equity capital (rights issues)

Back 27

Front 28

It includes all those who supervise the production work but do not actually execute the work themselves.

Back 28

Line management

Front 29

This may be considered to be providing the greatest possible return to the owner's investments in the firm.

Back 29

Optimum capital structure

Front 30

FORMULA:Cost of capital (new issues)

Back 30

Front 31

These are costs are those which vary proportionally with output, whereas indirect costs are independent of the level of output (at least, in the short period).

Back 31

Direct costs

Front 32

It is concerned with two quite distinct areas: costs and revenues.

Back 32

Budgeting

Front 33

It is the ratio of (fixed interest) debt finance to equity finance (owners' stake in the firm).

Back 33

Gearing

Front 34

It is a measure of the utility of the item(s).

Back 34

Value

Front 35

It is an estimate of the costs and incomes to be generated if a proposed project is undertaken.

Back 35

Budget

Front 36

It may be viewed as being the opposite of security, higher risks being less secure.

Back 36

Risk

Front 37

These are useful to indicate how costs vary over different levels of output, and between different types of project.

Back 37

Cost patterns

Front 38

It is gross profit minus depreciation and interest on loans.

Back 38

Net profit

Front 39

It is net profit minus tax payable upon that profit and, thus, represents the earnings available as a surplus, which may be used as a source of capital or may be distributed among the owners of the firm.

Back 39

Profit after tax

Front 40

Its used depends primarily upon the nature of the production system, but the aim of any costing system is cost control which is achieved by recording the costs actually incurred, comparing those costs with a predetermined standard, and taking any necessary corrective action.

Back 40

Systems of costing

Front 41

It calculates the period required for the incremental net cash inflows generated by the investment to amount in total to the initial incremental capital outlay.

Back 41

Payback method

Front 42

It is total sales revenue minus production and sales expenses.

Back 42

Gross profit

Front 43

This is the simplest costing system whereby the overall cost of a completed project is compared with the revenue generated to determine whether the project achieved the required level of profit.

Back 43

Overall historic costing

Front 44

They will use budgeting techniques in respect of their own activities which, although often similar in their underlying principles to those used in the construction industry, will be adapted to the clients' requirements.

Back 44

Clients

Front 45

They are the architect, PQS, structural engineers, and services engineers ± are usually employed under standard contracts (conditions of engagement/appointment, produced by the appropriate professional institution) with the client.

Back 45

Consultants

Front 46

This is a similar process to the overall historic costing described above, but is carried out for each project at predetermined intervals (often monthly).

Back 46

Periodic historic costing

Front 47

It is a system whereby costs are predetermined and subsequently compared with actual costs achieved to facilitate control.

Back 47

Standard costing

Front 48

This system is most suited to production in which a unit of output may be readily identified throughout the production process so that all costs attributable to the production of that unit may be allocated to it.

Back 48

Job and unit costing

Front 49

It is the normal basis for price calculation and may be classified in several ways but, whatever classification is used, the cost elements remain, each being worthy of separate attention.

Back 49

Predicted costs

Front 50

It is probably the primary objective of any business enterprise.

Back 50

Survival

Front 51

It is a sensitivity analysis technique to aid decision making where a spectrum of investments is being considered.

Back 51

Breakeven analysis

Front 52

It is a technique which takes the time-value of money into account and may be considered to operate as a reversal (or perhaps more accurately a reciprocal) of compound interest.

Back 52

Discounting

Front 53

It is a final stage in investment appraisal. It examines the effects of changes in the variables.

Back 53

Sensitivity analysis