Finance and Accounting Concepts

These flashcards cover key concepts related to finance and accounting, including sources of finance, costs, profits, and financial ratios.

Capital expenditure

Funds used by a company to acquire or upgrade physical assets such as property, plants, or equipment.

Revenue expenditure

Expenses incurred in the day-to-day functioning of the business that do not create assets.

Internal sources of finance

Funds that come from within the business, such as retained earnings or personal funds.

External sources of finance

Funding obtained from outside the business, including loans, share capital, and crowdfunding.

Lease

A contract granting use or occupation of property during a specified time for a specified payment.

Initial public offering (IPO)

The process of offering shares of a private corporation to the public in a new stock issuance.

Microfinance providers

Organizations that offer financial services to individuals and small businesses lacking access to traditional banking.

Decision tree

A graphical representation of possible outcomes in decision-making scenarios.

Fixed costs

Expenses that do not change with the level of production or sales.

Variable costs

Costs that vary directly with the level of production.

Gross profit

Revenue remaining after deducting the cost of goods sold.

Profit margin

A financial metric indicating the percentage of profit made from total revenue.

Return on capital employed (ROCE)

A financial ratio that measures a company's profitability and the efficiency with which its capital is employed.

Liquidity

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

Current ratio

A liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets.