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60 Cards in this Set
- Front
- Back
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Business angels
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Wealthy and entrepreneurial investors who risk their money in small to medium sized businesses that have high growth potential.
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Capital expenditure
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Spending by businesses on fixed assets such as the purchase of land and buildings
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Creditors
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Individuals or organizations that the business owes money to that needs to be settled within the next 12 months.
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Debentures
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A type of long term loan to a business with the promise of fixed annual interest payments to the debenture holders.
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External Financing
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Getting sources of finance from outside the organization, such as through debt, share capital, or funding from the government.
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Factoring
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A financial service whereby a factor collects debts on behalf of other businesses, in return for a fee.
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Leasing
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Suitable if a firm needs to use expensive assets such as equipment or vehicles.
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Non-recourse debt factoring
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A financial service where a debt factor, such as a bank, protects its customer against bad debts that they might incur.
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Overdrafts
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A service offered by financial institutions that allow a business to spend in excess of the amount in its account, up to a predetermined limit.
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Revenue expenditure
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Spending on the day-to-day running of a business, such as rent, wages, and utility bills.
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Sources of finance
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The general term used to refer to where of how businesses obtain their funds, such as from working capital, commercial lenders and/or government assistance.
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Working Capital
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The day to day money that is available to a business
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Accounting rate of return
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An investment appraisal technique that calculates the average annual profit of an investment project.
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Discounted cash flow
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An investment appraisal technique that reduces the value of the money that a business receives in future years.
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Investment appraisal
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A financial decision-making tool that helps managers to assess whether certain investments projects should be undertaken based mainly on quantitative techniques.
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Net present value
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An investment appraisal technique that calculates the total discounted cash flows, minus the initial cost of an investment project.
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Payback period
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An investment appraisal technique which estimates the length of time that is will take to recoup in initial cash outflow of an investment project.
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Qualitative investment appraisal
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Refers to judging whether an investment project is worthwhile through non-numerical means, such as whether an investment decision is in line with the corporate culture.
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Quantitative investment
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Appraisal refers to judging whether an investment project is worthwhile through numerical means, such as payback period, accounting rate of return and net present value.
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Assets
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Items owned by a business and have a monetary value.
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Assets
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Items owned by a business and have a monetary value.
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Cash
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The actual money a business has received from selling its products
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Cash flow
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The transfer or movement of money into and out of an organization
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Cash flow forecast
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A financial document that shows the predicted future cash inflows and cash outflows for a business over a trading period.
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Cash flow statement
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The financial document that records the actual cash inflows and cash outflow fro a business over a specified trading period, usually 12 months.
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Closing balance
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The value of cash left in a business at end of the month, as shown in its cash flow forecast or statement.
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Current assets
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Resources that belong to a business that are intended to be used within the next twelve month
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Creditor
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Businesses that have sold goods or services on credit and will collect this money at a future date
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Debtors
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Private customers or commercial customers who have purchased goods or services on credit, so therefore owe the business money that must be paid at a later date
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Expenses
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Spending in the working capital cycle of a business
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Liabilities
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Debts owed by a business
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Liquidity
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The ability of a business to convert assets into cash quickly and easily without a fall in its value
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Liquidity crisis
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A cash flow emergency situation where a business does not have enough cash to pay its current liabilities
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Net cash flow
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The cash that is left over after cash outflows have been accounted for from the cash inflows
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Overheads
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The costs not directly associated with the production process but necessary for providing and maintaining business operations
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Socks/ inventories
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The physical goods that a business has in its possession for further production
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Working capital
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The amount of finance available to a business for its daily operations
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Appropriation Account
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The final section of a profit and loss account which shows how the net profits of a business are distributed.
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Balance Sheet
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Financial Statement showing a firm‚ assets and liabilities at a specific point in time. Shows the sources of funds, and equity
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Book Value
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The value of an asset as shown on a balance sheet.
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Capital Employed
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Value of all long-term sources of finance for a business such as bank loans, share capital, and any reserves the business holds.
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Cost Of Goods Sold
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Shown in the Trading Account section of a Profit and Loss Account. It represents the direct costs of producing or purchasing a particular level of stock that has actually been sold to customers.
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Depreciation
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The fall in value of fixed assets over time.
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Final Accounts
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Also known as published accounts, the annual financial statements that all limited companies are legally obliged by the authorities to report.
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First In, First Out (FIFO)
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Method of Stock valuation whereby stock is valued based on the order in which it was purchased by the business.
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Fixed Assets
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Items of monetary value that are owned by a business, but not intended to be sold within the next twelve months.
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Goodwill
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When the value of a firm exceeds its book value. Raises the value of a business through the value of a business‚ contracts and reputations
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Acid Test Ratio
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Liquidity ratio that measures the ability of a firm to meet its short-term debts. It differs from the current ratio in that stocks are ignored from calculation because not all stocks can be turned into income
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Creditor Days Ratio
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Short-term liquidity ratio that calculates the ability of a firm to meet its debts within the next 12 months. Current Assets divided by current liabilities
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Debtor Days Ratio
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Efficiency ratio that measures the average number of days it takes for a business to collect the money owed from its debtors. Lower is better
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Dividend Yield
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Type of shareholders ratio which shows the dividends received as a percentage of the market price of the share. Used to measure the attractiveness of a business and the risk of a lender to the firm.
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Earnings per Share (EPS)
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A shareholder ratio that stockholders could receive per share if the company allocated all its after-tax profits to the shareholders. Higher is better
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Gearing
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Long-term liquidity ratio that measures the percentage of a firm‚ capital employed that comes from long-term liabilities, such as debentures or mortgages.
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Gross Profit Margin (GPM)
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Profitability ratio that shows the percentage of sales revenue that turns into gross profit
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Liquid Assets
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Assets of a business that can be turned into cash quickly without losing value (cash, stock, debtors)
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Liquidity Crisis
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A situation in which a firm is unable to pay its short-term debts, current liabilities outnumber assets (Acid ratio is less than 1:1)
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Net Profit Margin (NPM)
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Profitability ratio that shows a percentage of sales revenue left over after all costs have been paid
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Ratio Analysis
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Management tool that compares different financial figures. Ratios can be classified into five categories: Profitability, efficiency, liquidity, gearing, and shareholder ratios.
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Return on capital employed (ROCE)
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Efficiency ratio that measures the profit of a business in relation to its size. The higher the ROCE figure, the better it is for the business as it shows more profit being generated from the amount of  money invested in the firm.
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Stock Turnover
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An efficiency ratio that measures the number of times a firm sells its stocks within a year. It can be expressed as the number of days it takes on average for a firm to sell all of its stocks. In calculating this the cost of goods sold is used rather than the selling price of the stocks.
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