Start Up Capital
money required to set up a business and keep the business operating until the business starts to break even
Overdraft
banks allow businesses to take additional money out of their account up to a certain limit
Loan
bank lends a fixed amount for an agreed time period, which must be repaid with interest
Equity Finanace
selling shares in the business to raise finance rather than borrowing
Debt Finance
borrowing money from a bank which must be re paid with interest
Micro Finance
lending small amounts of finance small business people to those who can’t access finance from another source
Crowd funding
raising finance by raising small amounts of money from a large number of people, usually via the Internet.
Trade Credit
– delaying payment to suppliers for an agreed time period
Cash Flow
cash used to pay short term debts (current assets - current liabilities)
Cash Flow
cash flow in and out of the business over a period of time
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
Net cash flow
Cash inflows - cash outflows
Profit
Sales revenue - total costs of making a product/service
Working Capital
- capital available to a business day to day to pay short term debts. Current Assets – current liabilities
Cash In Flow
Cash going into a business
Cash Out Flow
cash going out of the business
Short term finance
finance required for short periods usually less than one year
Long Term Finance
finance required for periods usually longer than one year
Sale of assets
selling equipment /machinery/inventory to finance the business
Retained Profit
reinvesting profits back into the business
Owners Savings
– using owners own savings to finance the business
Capital Employed
Money invested in a business (buildings, machinery)
Internal Sources of Finance
Finance sourced from inside the business - for example owner's funds, sale of assets and retained profit all are
Capital Expenditure
money spent by a business or organization fixed assets, such as land, buildings, and equipment.
Revenue Expenditure
money spent by a business or organization on day to day operating costs such as rent, insurance, heating, maintenance etc
Sale and Leaseback
Selling an asset for a capital sum and then leasing at an agreed rate from the buyer.
Fixed Cost
Costs that don't change with output.
Variable Costs
Costs that change with output.
Marginal Costs
the cost added by producing one additional unit of a product or service
Direct costs
A cost that can be directly tied to the production of specific goods or services
Indirect costs
A cost that can't be directly tied to the production of specific goods or services
Net assets
Total assets - Total Liabilities
Reserves
Liquid assets held by a bank, company or government in order to meet expected future payments and/or emergency needs
Window Dressing
Presenting the company accounts in a favourable light – to give the impression of a better financial position
Trade Receivables
the value of payments to be received from customers who have bought goods on credit
Trade Payables
value of debts for goods bought on credit payable to suppliers; also known as ‘accounts payables’.
Debt Factoring
With debt factoring, a business can raise cash by selling their outstanding sales invoices (receivables) to a third party (a factoring company) at a discount.