IB Business and Management - Accounts and Finance (copy)

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Sources of Finance

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20 Terms

1

Sources of Finance

Various means by which a business obtains funds to finance its operations and growth, such as retained profits, bank loans, and issuing shares.

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2

Investment Appraisal

Techniques used to evaluate the attractiveness and feasibility of an investment project, including methods like payback period, net present value (NPV), and internal rate of return (IRR).

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3

Financial Statements

Reports that summarize the financial performance and position of a business, including the income statement, balance sheet, and cash flow statement.

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4

Ratio Analysis

The use of financial ratios to evaluate a company’s performance and financial condition, such as profitability, liquidity, efficiency, and gearing ratios.

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5

Budgeting

The process of creating a plan to spend an organization's resources, including setting financial targets and monitoring actual performance against these targets.

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6

Depreciation

The allocation of the cost of a tangible fixed asset over its useful life.

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7

Working Capital Management

Strategies for managing a company’s short-term assets and liabilities to ensure sufficient liquidity to meet its obligations.

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8

Cash Flow Statement

A financial report that shows the inflows and outflows of cash within a company over a specific period.

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9

Profitability Ratios

Ratios that measure a company’s ability to generate profit relative to its revenue, assets, or equity, such as gross profit margin and net profit margin.

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10

Liquidity Ratios

Ratios that measure a company’s ability to meet its short-term obligations, such as the current ratio and quick ratio.

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11

Gearing Ratios

Ratios that assess the level of a company’s debt compared to its equity, such as the debt-to-equity ratio.

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12

Cost of Capital

The cost of funds used for financing a business, which includes the cost of debt and the cost of equity.

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13

Break-even Analysis

A calculation to determine the sales volume at which total revenues equal total costs, resulting in no profit or loss.

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14

Amortization

The process of spreading the cost of an intangible asset over its useful life.

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15

Capital Budgeting

The process of planning and managing a company’s long-term investments in projects and assets.

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16

Dividend Policy

A company’s approach to distributing profits back to its shareholders either in the form of cash dividends or stock dividends.

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17

Cost-Volume-Profit (CVP) Analysis

A tool that helps managers understand the relationship between cost, volume, and profit in decision-making.

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18

Retained Earnings

The portion of net income that is kept in the company rather than distributed to shareholders as dividends.

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19

Financial Leverage

The use of borrowed funds to increase the potential return on investment.

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20

Financial Planning

The process of creating a strategic plan to manage a company’s financial resources to achieve its goals.

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