front 1 An asset | back 1 is any item owned by a business that can generate an income for the enterprise. |
front 2 Capital | back 2 is the money invested into a business either by its owners or by organisations such as banks. |
front 3 Non-current assets | back 3 are assets that a business expects to hold for one year or more. Examples include property and vehicles. |
front 4 Short-term sources of finance | back 4 are needed for a limited period of time, normally less than one year. |
front 5 Long-term sources of finance | back 5 are those that are needed over a longer period of time, usually over a year. |
front 6 Insolvency | back 6 exists when a business’ debts (or liabilities) exceed the assets available to pay them. |
front 7 Liabilities | back 7 refers to the money owed by a business to individuals, suppliers, banks and others. |
front 8 Bankruptcy | back 8 occurs when an individual, a sole trader or a partnership is judged unable to pay its debts by a court of law. |
front 9 Liquidation | back 9 is the dissolution of a company by selling its assets to settle its liabilities. |
front 10 Administration | back 10 is a process available to a company to protect itself while it attempts to pay its debts and to escape insolvency. |
front 11 Working capital | back 11 is the cash a business has for its day-to-day spending. Current Assets - Current Liabilities. |
front 12 Current assets | back 12 are items owned by a business that can be readily turned into cash. Examples include cash, money owed by customers (trade receivables) and inventories (stocks). |
front 13 Trade payables | back 13 is the amount of money owed by a business to its suppliers for goods and services that have been received but which have not been paid for. |
front 14 Trade receivables | back 14 is the amount owed by a business’ customers for products that have been supplied but for which payment has not yet been made. |
front 15 Revenue expenditure | back 15 refers to the purchase of items such as fuel and raw materials that will be used up within a short space of time. |
front 16 Capital expenditure | back 16 is the spending by a business on noncurrent assets such as premises, production equipment and vehicles. |
front 17 A statement of financial position | back 17 is a financial statement that records the assets (possessions) and liabilities (debts) of a business on a particular day at the end of an accounting period. It was previously called a balance sheet. |
front 18 An income statement | back 18 is a financial statement showing a business’ sales revenue over a trading period and all the relevant costs incurred to generate that revenue. |
front 19 An internal source of finance | back 19 is one that exists within the business. |
front 20 An external source of finance | back 20 is an injection of funds into the business from individuals, other businesses or financial institutions. |
front 21 Trade credit | back 21 is a period of time offered by suppliers of goods and services before payment is to be made. |
front 22 A bank loan | back 22 is an amount of money provided to a business for a stated purpose in return for a payment in the form of interest charges. |
front 23 Venture capital | back 23 is funds (in the form of a mix of share and loan capital) that is advanced to businesses which are thought to be relatively high-risk. |
front 24 Debt factoring | back 24 takes place when banks provide up to 80 per cent of the value of a business’ debts immediately to provide an instant inflow of cash. |
front 25 Microfinance | back 25 is the provision of financial services for poor and low-income clients. |
front 26 Crowdfunding | back 26 is a source of finance that entails collecting relatively small amounts of money from a large number of supporters (the ‘crowd’). |
front 27 A government grant | back 27 is a sum of money given to entrepreneurs or businesses for a specific purpose. |
front 28 Cash | back 28 is a business’ most liquid asset – it is notes and coins as well as funds held in the business’ bank accounts. |
front 29 A cash-flow forecast | back 29 is a document that records a business’ anticipated inflows and outflows of cash over some future period, frequently one year. |
front 30 Costs | back 30 are expenses that a business has to pay to engage in its trading activities. |
front 31 Revenue | back 31 is the income a business receives from selling its goods or services. |
front 32 Direct costs | back 32 can be related to the production of a particular product and vary directly with the level of output. |
front 33 Indirect costs | back 33 are overheads that cannot be allocated to the production of a particular product and relate to the business as a whole. |
front 34 Full costing | back 34 allocates all the costs of production for the whole business. Therefore, these costs are absorbed into each output unit. This is also known as absorption costing. |
front 35 Contribution | back 35 can be defined as the difference between sales revenue and variable costs of production. |
front 36 Break-even | back 36 is the level of production or output at which a business’ sales or total revenue is exactly equal to its total costs of production. |
front 37 Profits | back 37 are the amount by which revenue exceeds total costs, although there are several different measures of profit. |
front 38 Contribution costing | back 38 calculates the cost of a product solely on the basis of variable costs, thus avoiding the need to allocate fixed costs. |
front 39 Average costs | back 39 are the total cost of production divided by the number of units produced. |
front 40 Marginal cost | back 40 is the extra cost resulting from producing one additional unit of output. In most situations the marginal cost of an additional unit of a product is the variable cost of its production. |
front 41 Cost-plus pricing | back 41 is the process of establishing the price of a product by calculating its cost of production and then adding an amount which is profit. |
front 42 Contribution pricing | back 42 is based on the notion that any price set that is higher than the variable cost of producing a product is making a payment towards fixed costs. |
front 43 Special-order decisions | back 43 occur when a business’ managers have to decide whether or not to accept unusual customer orders. |
front 44 The margin of safety | back 44 measures the quantity by which a firm’s current level of sales exceeds the level of output necessary to break even. |
front 45 Incremental budgeting | back 45 is a process where budget figures are minor changes from the preceding period’s budgeted or actual data. |
front 46 A flexible budget | back 46 is a budget that is designed to change along with the sales volume or production levels. |
front 47 A budget holder | back 47 is responsible for the use and management of a particular budget. |
front 48 Zero budgets | back 48 exist when budgets are automatically set at zero and budget holders have to argue their case to receive any funds. |