5 AS Finance and Accounting 2023 Flashcards


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1

Break even,

Level of output where total revenue is equal to total costs - neither a profit or loss is made.

2

Capital Expenditure

money spent by a business or organization fixed assets, such as land, buildings, and equipment.

3

Cash flow

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

4

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

5

Cash Flow Forecast

Estimate of future cash inflows and outflows

6

Cash Inflow

Cash going into a business

7

Cash outflow

cash going out of the business

8

Crowd Funding

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

9

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.

10

Debt Finance

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

11

Debentures

a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest.

12

Direct costs

A cost that can be directly tied to the production of specific goods or services

13

Equity Finance

selling shares in the business to raise finance rather than borrowing

14

Fixed Clost

Costs that don't change with output.

15

Indirect costs

A cost that can't be directly tied to the production of specific goods or services

16

Internal Sources of Finance

Finance sourced from inside the business - for example owner's funds, sale of assets and retained profit all are

17

Loan

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

18

Long term finance

finance required for periods usually longer than one year

19

Margin of safety,

The amount sales can fall before the break-even. point is reached and the business makes no profit.

20

Marginal Costs

the cost added by producing one additional unit of a product or service

21

Micro Finance

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

22

Net cash flow

Cash inflows - cash outflows

23

Net Cash Flow

Cash inflows - cash outflows

24

Overdraft

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

25

Owners savings

– using owners own savings to finance the business

26

Revenue Expenditure

money spent by a business or organization on day to day operating costs such as rent, insurance, heating, maintenance etc

27

Sale and Leaseback

Selling an asset for a capital sum and then leasing at an agreed rate from the buyer.

28

Sale of assets

selling equipment /machinery/inventory to finance the business

29

Short Term Finance

finance required for short periods usually less than one year

30

Start Up Capital

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

31

Variable Costs

Costs that change with output.

32

Working Capital

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

33

Working Capital

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

34

Average cost (Unit Cost)

This is the average cost of producing each unit of output: unit cost = total cost of producing this product /Number of units produced

35

Total Cost

Total costs, = total fixed costs + total variable costs

36

Marginal Cost

the cost of producing one extra unit.

37

Special order decisions

Special-order decisions involve situations in which management must decide whether to accept unusual customer orders. These orders typically require special processing or involve a request for a low price.

38

Contribution

"(Contribution looks at the profit made on individual products. It is used in calculating how many items need to be sold to cover all the business' costs (variable and fixed).

39

Contribution per unit

= selling price per unit less variable costs per unit

40

Bankruptcy

Bankruptcy is a legal process conducted when a business is unable to repay outstanding debts or obligations.

41

Liquidation

when a firm goes bankrupt, stops trading and its assets are sold for cash to pay suppliers and other creditors.

42

Administration

When a business goes bankrupt an administrator is called into oversee the liquidation of the business assets. This process is called “going into administration”

43

Budgets

a detailed financial plan or revenue and expenditure over a specified time period.

44

Incremental budgeting

uses last year’s budget as a basis and an adjustment is made for the coming year.

45

Flexible budgets

(Flexible budgeting) cost budgets for each expense are allowed to vary if sales or production vary from budgeted levels.

46

Zero budgeting

setting budgets to zero each year and budget holders have to justify why they should receive any finance.

47

Variances

Adverse variance: exists when the difference between the budgeted and actual figure leads to a lower-than-expected profit. Favourable variance: exists when the difference between the budgeted and actual figure leads to a higher-than-expected profit.