Business Finance Unit

What is the primary purpose of Capital Expenditure?

Generating long term profits.

What are some examples of Capital Expenditure?

Grill at Whataburger, machinery, properties, furniture, computer software and hardware, motor vehicles, patents.

What defines Revenue Expenditure?

Money spent on day-to-day operations.

What is Retained Profit?

Profit that is reinvested back into the business after taxes and dividends.

What are Internal Sources of Finance?

Money coming from inside the company, such as personal funds or retained profits.

What is Share Capital?

Funds raised by selling shares of a limited company.

What is the main difference between Debt Capital and Equity Capital?

Debt Capital involves repayment with interest, while Equity Capital involves selling shares with potential dividends.

What are the benefits of Trade Credit?

Delays payment, improves cash flow, and is interest-free.

What is a Grant?

Financial assistance provided by the government or organizations, not requiring repayment.

What does Gearing refer to in finance?

The ratio of debt to equity in a company's capital structure.

How is the Gross Profit Margin calculated?

(Gross profit margin / sales revenue) x 100.

What are the characteristics of a Balance Sheet?

It provides a snapshot of a company’s assets, liabilities, and equity at a specific time.

What is Intangible Asset?

Non-physical assets like goodwill, licenses, patents, trademarks, and copyrights.

What is the difference between Insolvency and Bankruptcy?

Insolvency is a state of being unable to pay debts, while bankruptcy is a legal state following insolvency.

What are Direct Costs?

Costs directly associated with production, like ingredients for a product.

What is Depreciation?

The rate at which an asset loses its value over time.

What does the Profit Margin Ratio indicate?

The profitability of a company before interest and taxes as a percentage of sales revenue.

What are Efficiency Ratios used for?

To measure how effectively a company utilizes its assets and manages its operations.