Business Basics, Finance, and Investing

Vocabulary flashcards covering key financial statements, business financing, markets, business functions, shares, and investment types with their associated risk levels.

Income Statement

A financial statement showing revenue and expenses over a period.

Gross Profit

The profit calculated by subtracting cost of goods sold from revenue: $\text{Gross profit} = \text{Revenue} - \text{COGS}$.

Net Profit

The remaining profit after operating expenses are subtracted from gross profit: $\text{Net profit} = \text{Gross profit} - \text{Operating expenses}$.

Assets

Any resources you own that can create economic benefit.

Current Assets

Any assets expected to be converted to cash, sold, or consumed within 12 months, such as cash and inventory.

Non-Current Assets

Any assets that will be held for longer than 12 months, such as property and machinery.

Liabilities

Anything you owe to external parties that requires financial obligations.

Current Liabilities

Financial obligations that must be paid or settled within 12 months, such as short-term debt or wages.

Non-Current Liabilities

Financial obligations that will not be due until after 12 months, such as loans and bonds payable.

Owners Equity

A company's assets after all liabilities have been subtracted: $\text{Owners Equity} = \text{Assets} - \text{Liabilities}$.

Debt Financing

Acquiring money where you must pay interest, such as bank loans, credit lines, and bonds.

Equity Financing

Acquiring money through selling shares of the company, such as crowdfunding or selling stocks to investors.

Break Even Point

The point at which total revenue equals total costs and the business is neither making nor losing money: $\text{Break Even Point} = \text{Fixed Costs} \div (\text{Selling Price Per Unit} - \text{Variable Cost Per Unit})$.

The Business Cycle

Economic fluctuations where declining consumer spending reduces profits and forces cost-cutting, whereas economic growth restores confidence, increasing spending and business profits.

Market

Any situation where buyers and sellers exchange goods and services.

Financial Markets

The intermediaries between the savers and the borrowers in an economy, such as banks.

Labour Markets

Markets consisting of employers, the employed, and the unemployed.

Stock Market

A market where shares in public companies are bought and sold.

Government Business Enterprises

Businesses that are entirely government owned and run.

Non-Profit Organisations

Organisations where all money owned goes back into the community or services.

Operations

The key business function responsible for purchasing supplies, transporting and storing goods, and overseeing the general day-to-day running of the business.

Marketing

The key business function that creates demand for the products or services that operations is working on, including design and promotion.

Finance (Business Function)

The key business function responsible for providing the other three parts of the business with enough money to fulfil their functions.

Human Resources

The business function tasked with ensuring departments have enough employees, effectively training, managing, disciplining, retaining, and dismissing employees.

Share

A part ownership of a business that can be bought and sold through a stock exchange.

Equity Capital

The money that a company raises from selling shares.

Dividends

Payments received by shareholders in return for investing in a business.

Investment Accounts

A financial repository used to hold cash, buy assets, or generate interest (e.g. cash management accounts, fixed-term deposits); carries a very low risk level.

Debentures and Unsecured Notes

Debt certificates issued by companies looking to borrow money from investors; debentures offer security if the money cannot be paid back, whereas unsecured notes do not (carries low-medium risk).

Superannuation

A government-regulated, tax-effective account to build long-term retirement wealth; carries a low risk level.

Managed Funds

An investment where capital from multiple investors is pooled together and deployed by a professional fund manager across a range of assets; carries a medium risk level.

Property (Investment)

Buying real estate and generating profit through rental income or reselling the property for a higher price than cost price; carries a medium risk level.

Shares (Investment)

Part-ownership in a publicly traded or private company, providing returns through capital gains and dividends; carries a high risk level.

Cryptocurrency

Digital tokens that can be bought online; carries a very high risk level.