Finance Unit business

Capital Expenditure

Capital Expenditure: Funds used by a company to acquire or upgrade physical assets such as property, buildings, or equipment for long-term use.

Revenue Expenditure

Definition: Regular expenses incurred by a business to maintain its operations and generate revenue. Examples include rent, salaries, and utility bills.

Personal funds

Definition: Personal funds are assets owned by an individual, not by a company or organization. These funds can include savings, investments, and personal property.

Retained profit

Flashcard: Retained profit is the portion of a company's net income that is kept within the business instead of being distributed to shareholders as dividends.

Sale of Assets

Definition: The process of selling a company's assets, such as equipment, property, or investments, typically to raise capital or streamline operations.

Share Capital

The total amount of capital raised by a company through the sale of its shares to investors. It represents ownership in the company.

Loan Capital

Type of capital raised by borrowing money from external sources like banks or financial institutions, which needs to be repaid with interest over a specified period.

Overdrafts

Overdrafts: Short-term borrowing facility provided by banks where an account holder can withdraw more money than available in their account, up to a set limit.

Trade credit

Trade credit is a form of short-term credit extended by a seller to a buyer, allowing the buyer to purchase goods or services on account and pay at a later date.

Microfinance

Microfinance: Financial services, such as loans and savings accounts, provided to low-income individuals or groups who typically lack access to traditional banking services.

Leasing

Leasing is a process where a company rents equipment or property for a specified period instead of purchasing it outright. It helps businesses access assets without a large upfront cost.

Angel investors

Flashcard: Angel investors are individuals who provide financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.

Short-term finance

Flashcard: Short-term finance refers to obtaining funds for a brief period, usually less than a year, to meet immediate financial obligations or capitalize on opportunities.

Long-term finance

Flashcard: Long-term finance refers to funding obtained for projects or investments with a repayment period exceeding one year. It helps businesses finance large expenses over an extended period, such as capital investments or expansion projects.

Fixed costs

Flashcard: Fixed costs are expenses that do not vary with production levels or sales, such as rent and salaries. They remain constant regardless of business activity.

Variable costs

Flashcard: Variable costs are expenses that change in relation to production levels. They fluctuate based on the quantity of goods or services produced.

Direct costs

Flashcard: Direct costs are expenses directly linked to producing goods/services, such as raw materials and labor. They vary with production levels.

Indirect costs

Flashcard: Indirect costs are expenses not directly tied to producing goods/services but are necessary for operations, like administrative expenses or utilities.

Revenue streams

Flashcard: Revenue streams are the various sources from which a company earns money through the sale of goods or services to customers.

Sales Revenue

Value of units sold by a business over a period of time

Costs of Goods sold

Direct costs of the production of goods sold by a company

Dividends

Dividends are payments made by a corporation to its shareholders, usually in the form of cash or additional shares, as a distribution of profits.

Retained profit

Cash

Profit

Current assets

Current liabilities

Overdrafts

Creditors

Tax

Payback Period

Average Rate of Return

The financial metric to assess the profitability of an investment or project over it’s lifespan

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a given period

Favourable Variance

Expenditure is lower than the projected budget, or revenue is exceeding projections positive and marked by a (F) in budget forecasts

Adverse Variance

Expenditure is surpasses the projected budget, or revenue fails to meet the quota negative and marked by an (A) in budget forecasts