Business Finance Vocabulary Flashcards

These flashcards cover essential terms and definitions related to business finance.

Capital Expenditure

$ spent on fixed assets (items used in the long term).

Revenue Expenditure

$ spent on daily running of the business.

Personal Funds

Main $ for sole traders/partnerships (capital/retained).

Retained Profits

$ kept after taxes and dividends to reinvest back into the company (capital/retained).

Sale of Assets

Sell unused assets (capital mostly).

Share Capital

Main source of finance for limited liability companies (initial public offering, more shares) (capital).

Loan Capital

Obtained from lending organizations (banks, etc) (capital).

Overdrafts

Temporarily take out more than is in the bank and repay later (revenue).

Trade Credit

Allow buy now and pay later (1-2 months) (revenue).

Crowdfunding

Get small $ from many individuals about new business venture (capital).

Leasing

Renting assets for a certain period (capital).

Microfinance Providers

Entrepreneurs who come from disadvantaged backgrounds - access to financial providers (capital).

Business Angels

Wealthy people that invest their own $ into a business (capital).

Fixed Costs

What business pays regardless of production/sells (output).

Variable Costs

Cost of production that change in proportion to the level of output.

Final Accounts

Profit/loss statement + financial position statement (helps with planning + transparency to stakeholders).

Total Costs

The overall costs incurred in the business.

Direct Costs

Related to the product/output of the products (normally also variable costs).

Indirect Costs

Not clearly traced to the production/product (also can be fixed costs).

Profit/Loss Statement

How much money a business made/lost over a period of time.

Balance Sheet

Snapshot of the value of a firm at a point in time (assets - liabilities = equity).

Assets

Resources owned by a business with economic value.

Liabilities

What a business owes to others.

Equity

The value of shares issued by a company.

Debtors

Persons that owe money to the business.

Creditors

Persons or entities that the business owes money to.

Intangible Assets

Non-current assets that earn revenue for a business.

Profitability Ratio

Shows how successful a business is in earning profits over a period.

Gross Profit Margin

Profitability of a firm after deducting direct costs.

Return on Capital Employed (ROCE)

Financial performance compared to capital invested.

Liquidity Ratios

Ability for a firm to pay short-term liabilities.

Current Ratio

Current assets divided by current liabilities.

Quick Ratio (Acid Test)

Measures the most liquid assets (cash) relative to short-term liabilities.