Financial Information and Decisions

Key financial terms and definitions related to business finance and economic decision-making.

Finance

Money used to purchase goods and services, often referred to as Capital for business.

Working Capital

Money needed to pay for the day-to-day costs of a business, such as wages and raw materials.

Capital Expenditure

Money spent on fixed assets that last more than one year, such as buildings and machinery.

Revenue Expenditure

Money spent on day-to-day expenses that do not involve the purchase of non-current assets, such as wages and rent.

Internal Finance

Finance sourced from within the business itself, such as retained profits or sale of assets.

External Finance

Finance sourced from outside the business, which includes options like bank loans and issuing shares.

Trade Credit

An agreement that allows a business to delay payment to its suppliers; considered a form of short-term finance.

Debentures

Long-term loan certificates issued by companies, generally requiring repayment with interest.

Crowdfunding

Raising money for a project or venture by gathering small contributions from a large number of people, usually via the internet.

Gearing

The ratio of long-term loans compared to total capital, indicating the financial risk of a business.

Equity Finance

Raising finance through the sale of shares, which does not require repayment but may dilute ownership.

Debt Finance

Raising finance by taking loans, which must be repaid and incur interest but retains ownership.

Factoring of Debts

Selling off accounts receivable to a debt factor agency for immediate cash, at a discount.

Micro-finance

Providing financial services like small loans to individuals or businesses that do not have access to traditional banking.

Overdraft

A credit facility allowing a business to withdraw more money than is available in its bank account.