UNIT 5-IGCSE business

This set of flashcards covers key financial concepts, definitions, and terminologies that are essential for understanding finance and accounting.

Short-term finance

Finance needs that last less than one year.

Long-term finance needs

Finance needs that last more than one year.

Fixed assets

Assets owned by a business used for a long period (usually more than a year) and not intended for resale.

Current assets

Assets expected to be converted into cash, sold, or consumed within one year as part of normal operations.

Retained profit

Profit generated in earlier years that is reinvested back into the business instead of being distributed to owners.

Internal source of finance

Money that comes from within a business, such as owners’ capital, retained profit, or money from selling assets.

External source of finance

Money introduced into a business from outside sources, such as loans or share capital.

Working capital

Money used in the day-to-day operations of a business.

Start-up capital

The finance needed by a new business to pay for fixed and current assets before it can begin trading.

Capital expenditure

Money spent by a business to acquire or improve long-term assets like equipment or buildings.

Bank overdraft

An agreement allowing a business to spend more money than it has in its account, typically for short-term cash flow.

Cash-flow forecast

A prediction of expected cash inflows and outflows over a future period.

Net cash flow

The difference between cash inflows and cash outflows in a given period.

Trade credit

Allows a business to receive stock now and pay for it later, improving short-term cash flow.

Cash inflows

Sums of money coming into the business, including sales revenue, loans, and money from investors.

Cash outflows

Sums of money leaving the business, including payments for rent, wages, and loans.

Opening balance

The amount of cash a business has at the start of a period.

Closing balance

The amount of cash a business has at the end of a period.

Overdraft facility

Allows a business to spend more money than it has in its bank account, up to an agreed limit.

Profit

The difference between total revenue and total costs of a business.

Gross profit

The difference between sales revenue and the cost of sales.

Net profit

The difference between gross profit and all other business expenses.

Operating profit

The profit made after all costs, including expenses, have been deducted from revenue.

Non-current asset

An item owned by a business long-term, usually for more than 12 months.

Current liability

An amount owed by a business that must be repaid within 12 months.

Current assets

Assets like cash, trade receivables, and inventory that are liquid and can be converted into cash.

Liquidity

The amount of cash and current assets a business has available to pay short-term obligations.

Insolvency

A situation where a business cannot pay its debts as they fall due.

Internal stakeholders

Individuals or groups within a business who use financial accounts to help make decisions.

Profit margin

The proportion of revenue turned into profit before interest and tax, expressed as a percentage.

Short-term finance needs

Finance needs that last less than one year.

Long-term finance needs

Finance needs that last more than one year.

Fixed assets

Assets owned by a business used for a long period (usually more than a year) and not intended for resale.

Current assets

Assets expected to be converted into cash, sold, or consumed within one year as part of normal operations.

Retained profit

Profit generated in earlier years that is reinvested back into the business instead of being distributed to owners.

Internal source of finance

Money that comes from within a business, such as owners’ capital, retained profit, or money from selling assets.

External source of finance

Money introduced into a business from outside sources, such as loans or share capital.

Working capital

Money used in the day-to-day operations of a business.

Start-up capital

The finance needed by a new business to pay for fixed and current assets before it can begin trading.

Capital expenditure

Money spent by a business to acquire or improve long-term assets like equipment or buildings.

Bank overdraft

An agreement allowing a business to spend more money than it has in its account, typically for short-term cash flow.

Cash-flow forecast

A prediction of expected cash inflows and outflows over a future period.

Net cash flow

The difference between cash inflows and cash outflows in a given period.

Trade credit

Allows a business to receive stock now and pay for it later, improving short-term cash flow.

Cash inflows

Sums of money coming into the business, including sales revenue, loans, and money from investors.

Cash outflows

Sums of money leaving the business, including payments for rent, wages, and loans.

Opening balance

The amount of cash a business has at the start of a period.

Closing balance

The amount of cash a business has at the end of a period.

Overdraft facility

Allows a business to spend more money than it has in its bank account, up to an agreed limit.

Profit

The difference between total revenue and total costs of a business.

Gross profit

The difference between sales revenue and the cost of sales.

Net profit

The difference between gross profit and all other business expenses. This can be expressed as: Net\, Profit = Gross\, Profit - All\, other\, business\, expenses.

Operating profit

The profit made after all costs, including expenses, have been deducted from revenue.

Non-current asset

An item owned by a business long-term, usually for more than 12 months.

Current liability

An amount owed by a business that must be repaid within 12 months.

Current assets

Assets like cash, trade receivables, and inventory that are liquid and can be converted into cash.

Liquidity

The amount of cash and current assets a business has available to pay short-term obligations.

Insolvency

A situation where a business cannot pay its debts as they fall due.

Internal stakeholders

Individuals or groups within a business who use financial accounts to help make decisions.

Profit margin

The proportion of revenue turned into profit before interest and tax, expressed as a percentage.

Short-term finance needs

Finance needs that last less than one year.

Long-term finance needs

Finance needs that last more than one year.

Fixed assets

Assets owned by a business used for a long period (usually more than a year) and not intended for resale.

Current assets

Assets expected to be converted into cash, sold, or consumed within one year as part of normal operations, such as cash, trade receivables, and inventory, that are liquid and can be converted into cash.

Retained profit

Profit generated in earlier years that is reinvested back into the business instead of being distributed to owners.

Internal source of finance

Money that comes from within a business, such as owners’ capital, retained profit, or money from selling assets.

External source of finance

Money introduced into a business from outside sources, such as loans or share capital.

Working capital

Money used in the day-to-day operations of a business, calculated as: Working\, Capital = Current\, Assets - Current\, Liabilities

Start-up capital

The finance needed by a new business to pay for fixed and current assets before it can begin trading.

Capital expenditure

Money spent by a business to acquire or improve long-term assets like equipment or buildings.

Bank overdraft

An agreement allowing a business to spend more money than it has in its account, typically for short-term cash flow.

Cash-flow forecast

A prediction of expected cash inflows and outflows over a future period.

Net cash flow

The difference between cash inflows and cash outflows in a given period, calculated as: Net\, Cash\, Flow = Cash\, Inflows - Cash\, Outflows

Trade credit

Allows a business to receive stock now and pay for it later, improving short-term cash flow.

Cash inflows

Sums of money coming into the business, including sales revenue, loans, and money from investors.

Cash outflows

Sums of money leaving the business, including payments for rent, wages, and loans.

Opening balance

The amount of cash a business has at the start of a period.

Closing balance

The amount of cash a business has at the end of a period, calculated as: Closing\, Balance = Opening\, Balance + Net\, Cash\, Flow

Overdraft facility

Allows a business to spend more money than it has in its bank account, up to an agreed limit.

Profit

The difference between total revenue and total costs of a business. This can be expressed as: Profit = Total\, Revenue - Total\, Costs

Gross profit

The difference between sales revenue and the cost of sales. This can be expressed as: Gross\, Profit = Sales\, Revenue - Cost\, of\, Sales

Net profit

The difference between gross profit and all other business expenses. This can be expressed as: Net\, Profit = Gross\, Profit - All\, other\, business\, expenses.

Operating profit

The profit made after all costs, including expenses, have been deducted from revenue. This can be expressed as: Operating\, Profit = Gross\, Profit - Operating\, Expenses

Non-current asset

An item owned by a business long-term, usually for more than 12 months.

Current liability

An amount owed by a business that must be repaid within 12 months.

Liquidity

The amount of cash and current assets a business has available to pay short-term obligations.

Insolvency

A situation where a business cannot pay its debts as they fall due.

Internal stakeholders

Individuals or groups within a business who use financial accounts to help make decisions.

Profit margin

The proportion of revenue turned into profit before interest and tax, expressed as a percentage. This can be expressed as: Profit\, Margin = \frac{Profit\, (before\, interest\, and\, tax)}{Revenue} \times 100\%