Unit 5 Financial Information and Decisions

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1

Start Up Capital

money required to set up a business and keep the business operating until the business starts to break even

2

Overdraft

banks allow businesses to take additional money out of their account up to a certain limit

3

Loan

"bank lends a fixed amount for an agreed time period, which must be repaid with interest"

4

Equity Finanace

selling shares in the business to raise finance rather than borrowing

5

Debt Finance

borrowing money from a bank which must be re paid with interest

6

Micro Finance

lending small amounts of finance small business people to those who can’t access finance from another source

7

Crowd funding

"raising finance by raising small amounts of money from a large number of people, usually via the Internet."

8

Trade Credit

– delaying payment to suppliers for an agreed time period

9

Cash Flow

cash used to pay short term debts (current assets - current liabilities)

10

Cash Flow

cash flow in and out of the business over a period of time

11

Cash flow forecast

Estimate of future cash inflows and outflows usually calculated month by month to ensure there is enough cash to pay short term debts

12

Net cash flow

Cash inflows - cash outflows

13

Profit

Sales revenue - total costs of making a product/service

14

Working Capital

- capital available to a business day to day to pay short term debts. Current Assets – current liabilities

15

Cash In Flow

Cash going into a business

16

Cash Out Flow

cash going out of the business

17

Short term finance

finance required for short periods usually less than one year

18

Long Term Finance

finance required for periods usually longer than one year

19

Sale of assets

selling equipment /machinery/inventory to finance the business

20

Retained Profit

reinvesting profits back into the business

21

Owners Savings

– using owners own savings to finance the business

22

Capital Employed

"Money invested in a business (buildings, machinery)"