The Need for Business Finance

A comprehensive set of vocabulary flashcards derived from notes about business finance.

Capital

Money needed to start and operate a business.

Start-up Capital

Funds required by a new business to pay for fixed and current assets.

Working Capital

Finance required for day-to-day operations, including raw materials and wages.

Short-term Finance Needs

Funds required to maintain positive cash flow during periods of low revenue.

Long-term Finance Needs

Funds typically used to buy fixed assets for long-term use.

Crowdfunding

Access to finance from a large number of small investors via online platforms.

Microfunding

Small-scale financial support for start-up businesses in less developed countries.

Personal Funds

Main source of finance for sole traders and partnerships.

Retained Profit

Profit kept in the business after tax and dividends have been paid.

Sale of Assets

Selling unused or excess assets to generate cash.

Overdraft

Temporary bank loan that allows a business to withdraw more than the account balance.

Grants

Non-repayable funds given by the government to support specific projects.

Debt Factoring

Third-party service providing immediate cash by selling receivables.

Leasing

Rental agreement for equipment, where ownership is retained by the lessor.

Trade Credit

Arrangement allowing goods to be bought and paid for later.

Venture Capital

Investment made into start-ups or small businesses with growth potential.

Current Assets

Assets likely to be converted into cash within one year.

Current Liabilities

Financial obligations due to be paid within one year.

Fixed Assets

Long-term tangible assets such as property, buildings, and machinery.

Liquidity

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

Cash Flow Cycle

Process of cash entering and leaving a business over time.

Cash Inflow

Money flowing into a business from various revenues.

Cash Outflow

Movement of money leaving a business for various expenses.

Cash Flow Forecast

Prediction of anticipated cash inflows and outflows over a period.

Net Cash Flow

Total inflow minus total outflow within a specific period.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Income Statement

Document recording income and expenses over a specific period.

Gross Profit

Sales revenue minus the cost of sales.

Net Profit

Gross profit minus all other business expenses.

Profit Margin

Measurement of profitability as a percentage of sales revenue.

Return on Capital Employed (ROCE)

Measure of how effectively capital is used to generate profit.

Debt

Money borrowed by a business that is owed to creditors.

Solvency

Ability of a business to meet its long-term financial obligations.

Ratio Analysis

Technique used to evaluate financial information and performance.

Share Capital

Funds raised by a company through the issuance of shares.

Loan Capital

Funds borrowed from financial institutions, repayable with interest.

Financial Institutions

Organizations that provide financial services, including banks and credit unions.

Creditors

Entities to whom the business owes money.

Shareholders

Individuals or entities that hold shares in a company.

Liquidity Ratio

Metric used to measure a business's ability to cover short-term obligations.

Cash Equivalents

Short-term investments easily convertible to cash.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Equity

The ownership interest in a business, typically in the form of shares.

Non-Current Assets

Assets held for more than one financial year.

Bank Loan

A sum of money borrowed from a bank for a fixed term and interest.

Cash Reserves

Funds set aside to meet future obligations or emergencies.

Dividend

A portion of a company's earnings distributed to its shareholders.

Fixed Costs

Costs that do not change regardless of production levels.

Variable Costs

Costs that vary directly with the level of production.

Capital Expenditure

Funds used by a business to acquire or upgrade physical assets.

Cost of Sales

The direct costs attributable to the production of the goods sold.

Market Trends

General direction in which a market is moving.

Borrowing Terms

Conditions agreed upon at the time of borrowing funds.

Third-Party Financing

Capital from outside sources that does not involve the business's own funds.

Fundraising

The process of gathering voluntary contributions to support a business or project.

Business Plan

A formal document outlining the operational and financial objectives of a business.

Economic Climate

Overall state of the economy at a given time.

Business Growth

An increase in the capacity or potential of a business.

Financial Asset

An asset that derives its value from a contractual claim.

Short-term Debt

Obligations that are due to be repaid within one year.

Long-term Debt

Obligations that are due to be repaid over a longer period.

Risk Management

Process of identification, assessment, and prioritization of risks.

Capital Structure

The mix of debt and equity financing used by a firm.

Financial Projections

Estimates of future financial outcomes for a business.

Sustainable Growth

The rate at which a company can grow its sales without running into cash flow problems.

Cash Management

Strategic handling of cash inflows and outflows.

Financial Health

An overall assessment of a business's financial stability and performance.

Market Capitalization

Total value of a company's outstanding shares of stock.

Investment Strategy

A plan to invest resources to achieve specific financial goals.

Debt Ratio

A financial ratio that measures the extent of a company's leveraged financing.