Unit 3.3 Working Capital

Front 1

assets

Back 1

items with a monetary value that belong to a business. can be either fixed assets ( machinery, tools and buildings) or current assets (such as debtors, cash, stocks.

Front 2

cash

Back 2

actual money a business has received from selling its products. can be cash in hand or cash at bank.

Front 3

cash flow

Back 3

the transfer or movement of money into and out of an organization. cash inflows mainly come from sales revenue whereas cash outflows are for items of expenditure.

Front 4

cash flow forcast

Back 4

refers to the financial document that shows the predicted future cash inflows and cash outflows for a business over a trading period.

Front 5

cash flow statement

Back 5

refers to the financial document that records the actual cash inflows and cash outflows for a business over a specified trading period, usually 12 months.

Front 6

closing balance

Back 6

refers to the value of cash left in a business at the end of the month, using the formula: closing balance= opening balance+ net cash flow.

Front 7

current assets

Back 7

resources owned by a business and intended to be used within the next 12 months, such as cash, stocks and debtors.

Front 8

creditors

Back 8

businesses that have sold goods or services on credit and will collect this money at a future date.

Front 9

debtors

Back 9

customers who have purchased goods or services on credit,, so owe the business money money which is collected at a t later rate.

Front 10

expenses

Back 10

the spending in the working capital cycle of a business, i.e. costs of production such as salaries, rent, advertising and distribution.

Front 11

liabilities

Back 11

debts owed by a business. current liabilities are debts need to be repaid within 12 months from the balance sheet date.( an overdraft); long-term liabilities such as mortgages and bank loans, are repayable over a longer period.

Front 12

liquidity

Back 12

the ability of a business to convert its assets into cash quickly and easily without a fall in its value.

Front 13

liquidity crisis

Back 13

refers to a cash flow emergency situation where a business does no have enough cash to pay its current liabilities ( short term debts).

Front 14

net cash flow

Back 14

the cash that is left over after cash outflows have been accounted for from the cash inflows.

Front 15

overheads

Back 15

the costs nor directly associated with the production process yet necessary for providing and maintaining business operations, e.g. lighting, rent, security and insurance.

Front 16

overtrading

Back 16

a situation that occurs when a business attempts to expand too quickly, without the sufficient resources to do so, usually by accepting so much orders.

Front 17

stocks (inventories)

Back 17

the physical goods that a business has in its possession for further production,(raw materials and unfinished goods or fore sale (finished goods).

Front 18

working capital

Back 18

the amount of finance available to a business for its daily operations. Also known as net current assets, it is calculated as current assets minus current liabilities.