Business - Unit 5: Finance and Accounting - Chapter 29: Business Finance

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start-up capital

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the capital needed by an entrepreneur to set up a business.

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working capital

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the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers.

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31 Terms

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start-up capital

the capital needed by an entrepreneur to set up a business.

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working capital

the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers.

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short-term finance

money required for short periods of time of up to one year.

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long-term finance

money required for more than one year.

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profit

revenue - costs

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liquidity

the ability of a business to pay its short term debts.

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administration

when administrators manage a business that is unable to pay its debts with the intention of selling it as a going concern.

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bankruptcy

the legal procedure for liquidating a business which cannot fully pay its debts out of its current assets.

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liquidation

when a business ceases trading and its assets are sold for cash to pay suppliers and other creditors.

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current assets

assets that either are cash or likely to be turned into cash within 12 months

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current liabilities

debts that usually have to be paid within one year

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capital expenditure

the purchase of non-current assets that are expected to last for more than one year.

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revenue expenditure

spending on all costs and assets other than non-current assets.

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retained earnings

profit after tax retained in a company rather than paid out to shareholders as dividends.

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internal sources

raising finance form the business’s own assets or from profits left in the business.

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external sources

raising finance from sources outside the business.

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non-current assets

assets kept and used by the business for more than one year.

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overdraft

a credit that a bank agrees can be borrowed by a business up to an agreed limit as and when required.

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factoring

selling of claims over trade receivables to a specialist organisation in exchange for immediate liquidity.

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hire purchase

a company purchases an asset and agrees to pay fixed repayments over an agreed time period. the asset belongs to the purchasing company once the final payment has been made.

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leasing

obtaining the use of an asset and paying a leasing charge over a fixed period, avoiding the need to raise long-term capital to buy the asset. the asset is owned by the leasing company.

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long-term loans

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debentures

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share capital

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business mortgages

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venture capital

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