Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
21 Cards in this Set
- Front
- Back
|
Section 3 - Sources of Finance
Unit 3.3 - Working Capital |
Section 3 - Sources of Finance
Unit 3.3 - Working Capital |
|
|
Define working capital
|
The money available for the daily running of a business
|
|
|
Define running costs
|
Immediate costs and expenditure
|
|
|
Define current assets
|
Resources that belong to a business that are intended to be used within the next twelve months
|
|
|
What are the three main current assets?
|
Cash, stocks and debtors
|
|
|
Define cash
|
It is the money that a business receives from the sale of goods and services.
|
|
|
Define stocks.
|
Unsold supplies of raw materials, semi finished goods, and finished goods.
|
|
|
Define liquidity
|
How easily an asset can be turned into cash
|
|
|
Define current liabilities
|
The money that a business owes that needs to be repaid within the next twelve months
|
|
|
How is working capital calculated?
|
Current assets minus current liabilities
|
|
|
What is current ratio?
|
A measure of liquidity which compares the values of current assets with current liabilities
|
|
|
What is profit?
|
The positive difference between a firm's total sales revenue and its total costs of production
|
|
|
Define cash flow
|
The transfer or movement of money into and out of an organization
|
|
|
Define cash flow forecast
|
A financial document that shows the expected movement of cash into and out of a business
|
|
|
What is a cash flow forecast based on?
|
1. Cash inflows
2. Cash outflows 3. Net cash flow |
|
|
Define net cash flow
|
The difference between cash inflows and cash outflows
|
|
|
What is opening balance?
|
The amount of cash at the beginning of a trading period
|
|
|
what is closing balance?
|
The amount of cash at the end of a trading period
|
|
|
What are some causes of cash flow problems?
|
1. Overtrading
2. Overborrowing 3. Overstocking 4. Poor credit control 5. Unforseen changes |
|
|
How can a firm improve its cash inflows?
|
1. Tighter credit control
2. Cash payments only 3. Change pricing policy 4. Improved product portfolio 5. Improved marketing planning |
|
|
How can a firm reduce its cash outflows?
|
1. Seek preferential credit terms
2. Seek alternative suppliers 3. Better stock control 4. Reduce expenses |
