Cambridge AS Business (9609) Flashcards - Unit 5: Finance and Accounting Flashcards

The level of output at which total revenue equals total costs — no profit or loss is made.

Money spent by a business on acquiring or maintaining fixed assets such as land, buildings, or equipment.

The movement of cash into and out of a business over a specific period.

A prediction of cash inflows and outflows over a given period, helping the business manage liquidity.

A forecast estimating future cash inflows and outflows.

Money received by a business from its operations or external sources.

Money paid out by a business for expenses, purchases, or debt repayments.

Raising small amounts of capital from a large number of individuals, typically online.

Selling unpaid customer invoices to a third party (factor) to receive immediate cash—usually at a discount.

Borrowing funds from external sources that must be repaid with interest.

A long-term loan instrument used by large companies to raise capital, typically offering fixed interest.

Costs that can be clearly and directly attributed to producing a specific product or service.

Raising finance by selling ownership shares in the company, rather than borrowing.

Costs that remain constant regardless of the level of output.

Costs not directly traceable to a specific product or activity, often shared across departments or functions.

Finance raised from within the business, such as retained profits, owner's capital, or sale of assets.

Borrowed money from a financial institution with fixed repayment terms and interest.

Funds required for long-term purposes, usually exceeding one year, such as capital investment.

The amount by which actual or expected sales exceed the break-even point.

The additional cost incurred by producing one more unit of output.

Providing small-scale loans to individuals or small businesses who do not have access to traditional banking services.

Cash inflows minus cash outflows over a specific time period.

An arrangement where a bank allows a business to withdraw more money than is currently in its account, up to an agreed limit.

Using the owner's personal savings to finance the business.

Spending on the day-to-day running costs of a business, such as wages, rent, and utilities.

Selling an asset to raise funds and then leasing it back from the buyer.

Selling business-owned equipment, machinery, or inventory to raise finance.

Finance needed for short periods, usually less than one year.

The capital required to start a business and fund operations until revenue is generated.

Costs that vary directly with the level of output.

Cash available to pay short-term debts, calculated as current assets minus current liabilities.

The funds a business has available on a day-to-day basis to cover short-term expenses.

The total cost of producing one unit, calculated by dividing total costs by the number of units produced.

The sum of fixed and variable costs incurred in producing goods or services.

The additional cost of producing one more unit of output.

A decision made by management on whether to accept a non-standard order, often at a lower price or with special conditions.

The difference between the selling price of a product and its variable cost—used to determine break-even point and profit margins.

Selling price per unit minus variable cost per unit.

A legal process for businesses that are unable to pay their debts, involving the sale of assets to repay creditors.

When a business is unable to pay its debts, it stops trading and its assets are sold to repay creditors.

The process where an external administrator is appointed to manage the affairs of a financially troubled company and arrange for asset liquidation or recovery.

A detailed financial plan showing expected income and expenditure over a set time period.

A budgeting method where the current year’s budget is based on the previous year’s figures, with adjustments for anticipated changes.

A budgeting method that allows costs to vary with levels of activity, such as changes in sales or production volumes.

A budgeting approach where all expenses must be justified for each new period, starting from a base of zero.

The difference between budgeted and actual performance. A favourable variance means better-than-expected results; an adverse variance indicates worse-than-expected performance.

The level of revenue needed for a business to cover all fixed and variable costs.

A financial statement showing revenue, costs, and profits over a specific time period, also known as an income statement.

A financial statement showing a company’s assets, liabilities, and equity at a specific point in time.

The total value of capital used in the business, typically calculated as non-current liabilities plus shareholders’ equity.

A profitability ratio measuring how efficiently a business uses its capital to generate profit, calculated as (Net profit / Capital employed) × 100.

A liquidity ratio that shows a firm's ability to pay short-term obligations, calculated as current assets / current liabilities.

A more stringent test of liquidity that excludes inventory from current assets, calculated as (Current assets - Inventory) / Current liabilities.

A measure of profitability calculated as net profit divided by revenue, expressed as a percentage.

The difference between sales revenue and the cost of goods sold.

The remaining profit after all expenses have been deducted from gross profit.

The allocation of the cost of an asset over its useful life.

A method of depreciation that charges the same amount each year over the asset's useful life.

A method of depreciation that applies a fixed percentage to the remaining value of the asset each year.

The total value of long-term finance invested in the business, including equity and long-term debt.

The time it takes to convert inputs into cash through sales, covering inventory, receivables, and payables periods.

The ability of a business to meet its short-term financial obligations.

The ability of a business to meet long-term financial obligations and remain operational.

A financial ratio that shows the proportion of debt to equity, indicating the level of financial risk.

The discount rate that makes the net present value (NPV) of an investment zero.

The time it takes for an investment to recover its initial cost from net cash inflows.

The average annual return from an investment expressed as a percentage of the initial investment.

The process of evaluating investment opportunities to determine their financial viability.

The mix of debt and equity that a business uses to finance its operations.

The cost to a business of raising finance through equity or debt, often expressed as a percentage.

Gross profit expressed as a percentage of revenue.

Net profit expressed as a percentage of revenue.