Finance

working capital

the capital needed to finance the day-to-day running costs and pay the short-term debts of a business

non-current assets

resources owned by a business that are expected to last for more than one year

current assets

resources that the business owns, which it will have for less than one year

trade receivables

the amount owed to the business by its customers who bought goods on credit

liquidity

the ability of a business to pay its short-term debts

current liabilities

short-term debts of the business, which need to be paid within one year

retained profit

profit made from current or past years, which can be reinvested into the business

overdraft

an agreement with the bank that allows a business to spend more money than it has in its account up to an agreed limit. The loan has to be repaid within 12 months.

venture capital

a source of finance provided by individuals or companies to start-up companies that have huge growth potential and are likey to give high returns

bank loan

provision of finance by a bank that the business wil repay with interest over an agreed period of time

leasing

obtaining the use of a non-current asset by paying a fixed amount per time period for a fixed period of time. Ownership remains with the leasing company.

hire purchase

the purchase of an asset by paying a fixed repayment amount per time period over an agreed period of time. The asset is owned by the purchasing company on completion of the final repayment.

share issue

a source of permanent capital available to limited liability companies

crowdfunding

financing a business idea by obtaining small amounts of capital from a large number of people, most often using the internet and social media networks.

cash inflow

the money coming into the business

cash outflow

the money going out of the business

cash flow forecast

an estimate of the future cash inflows and outflows of a business

net cash flow

cash inflow minus cash outflow

opening balance

the projected bank balance at the start of a specific period.

closing balance

how much cash the business expects to have at the end of a specific period, e.g., a month

revenue

the amount earned from the sale of products or services

total cost

all the variable and fixed costs of producing the total output

gross profit

the difference between revenue and cost of sale

profit

the difference between revenue and total costs

statement of profit or loss/performance

a financial statement that records the revenue, costs and profits of a business for a given period

cost of sales

the cost of purchasing the raw materials/goods and packaging for producing or selling of products and services

expenses

the costs that are not directly linked to the production or the selling of products and services