Business A level theme 2

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Capital

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Tags and Description

172 Terms

1

Capital

The money provided by the owners in a business

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Capital expenditure

Spending on business resources that can be used repeatedly over a period of time

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3

Internal finance

Money generated by the business or its current owners

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4

Retained profit

Profit after tax that is 'ploughed back' into the business

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5

Revenue expenditure

Spending on business resources that have already been consumed or will be very shortly

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6

Sale and leaseback

The practice of selling assets, such as property or machinery, and leasing them back from the buyer

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7

Authorised share capital

The maximum amount that can be legally raised

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8

Bank overdraft

An agreement between a business and a bank that means a business can spend more money that it has in its account (going 'overdrawn'). The overdraft limit is agreed and interest is only charged when the business goes overdrawn

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9

Capital gain

The profit made from selling a share for more than it was bought

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10

Crowd funding

Where a large number of individuals invest in a business or project on the internet, avoiding the use of a bank

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11

Debenture

A long-term loan to a business

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12

Equities

Another name for an ordinary share

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13

External finance

Money raised from outside the business

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14

Issued share capital

Amount of current share capital arising from the sale of shares

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15

Lease

A contract to acquire the use of resources such as property or equipment

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16

Peer-to-peer lending (P2PL)

Where individuals lend to other individuals without prior knowledge of them, on the internet

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17

Permanent capital

Share capital that is never repaid by the company

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18

Secured loans

A loan where the lender requires security, such as property, to provide protection in case the borrower defaults

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19

Share capital

Money introduced into the business through the sale of shares

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20

Unsecured loans

Where the lender has no protection if the borrower fails to repay the money owed

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21

Venture capitalism

Providers of funds for small or medium-sized companies that may be considered too risky for other investors

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22

Collateral

An asset that might be sold to pay a lender when a loan cannot be repaid

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23

Incorporated business

A business model in which the business and the owner(s) have separate legal identities

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24

Limited liability

A legal status that means shareholders can only lose the original amount they invested in a business

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25

Long-term finance

Money borrowed for more than one year

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26

Rights issue

Issuing new shares to existing shareholders at a discount

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27

Short-term borrowing

Money borrowed for 12 months or less

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28

Undercapitalised

A business not raising enough capital when setting up

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29

Unincorporated businesses

A business model in which there is no legal difference between the owner(s) and the business

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30

Unlimited liability

A legal status which means that business owners are liable for all business debts

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31

Business plan

A plan for the development of a business, giving details such as the products to be made, resources needed, and forecasts such as costs, revenues and cash flow

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32

Cash-flow forecast

The prediction of all expected receipts and expenses of a business over a future time period which shows the expected cash balance at the end of each month

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33

Cash inflows

The flow of money into a business

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34

Cash outflows

The flow of money out of a business

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35

Net cash flow

The difference between the cash flowing in and the cash flowing out of a business in a given time period

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36

Solvency

The degree to which a business is able to meet its debts when they fall due

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37

Consumer income

The amount of income remaining after taxes and expenses have been deducted from wages

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38

Consumer trends

The habits or behaviours of consumers that determine the goods and services they buy

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39

Economic growth

The rise in output of an economy as measured by the growth in GDP usually as a percentage

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40

Economic variables

Measures within the economy which have effects on business and consumers. Examples include unemployment, inflation and exchange rates

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41

Extrapolation

Forecasting future trends based on past data

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42

Forecasting

A business process, assessing the probable outcome using assumptions about the future

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43

Sales forecast

Projection of future sales revenue, often based on previous sales data

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44

Time series data

A method that allows a business to predict future levels from past figures

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45

Average cost or unit cost

The cost of producing one unit, calculated by dividing the total cost by the output

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46

Fixed cost

A cost that does not change as a result of a change in output in the short run

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47

Long run

The time period where all the factors of production are variable

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48

Profit

The difference between total costs and total revenue. It can be negative.

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49

Sales revenue

The value of output sold in a particular time period. It is calculated by price x quantity of output

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50

Sales volume

The quantity of output sold in a particular time period

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51

Semi-variable cost

A cost that consists of both fixed and variable elements

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52

Short run

The time period where at least one factor of production is fixed

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53

Total cost

The entire cost of producing a given level of output

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54

Total revenue

The amount of money the business receives from selling output

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55

Variable cost

A cost that rises as output rises

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56

Break-even

When a business generates just enough revenue to cover its total costs

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57

Break-even chart

A graph containing the total cost and total revenue lines, illustrating the break-even output

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58

Break-even output

The output a business needs to produce so that its total revenue and total costs are the same

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59

Break-even point

The point at which total revenue and total costs are the same

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60

Contribution

The amount of money left over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit.

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61

Margin of safety

The range of output between the break-even level and the current level of output, over which a profit is made

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62

Budget

A quantitative economic plan prepared and agreed in advance

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63

Budgetary control

A business system that involves making future plans, comparing the actual results with the planned results and then investigating the causes of any differences

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64

Historical figures

Quantitative information based on past trading records

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65

Production cost budget

A firm's planned production costs for a future period of time

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66

Sales budget

A firm's planned sales for a future period of time - can be measured in terms of volume or revenue

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67

Variance

The difference between actual financial outcomes and those budgeted

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68

Variance analysis

The process of calculating variance and attempting to identify their causes

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69

Zero-based budgeting or zero budgeting

A system of budgeting where no money is allocated for costs or spending unless they can be justified by the fund holder (they are given a zero value).

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70

Amortisation

The writing off of an intangible asset

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71

Cost of sales

The direct costs of a business

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72

Exceptional costs

A one off cost, such as a large bad debt

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73

Gross profit

The difference between revenue/turnover and cost of sales

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74

Gross profit margin

Gross profit expressed as a percentage of revenue/turnover

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75

Operating profit

The difference between gross profit and business overheads, such as selling and administrative expences

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76

Operating profit margin

Operating profit expressed a percentage of revenue/turnover

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77

Profit for the year or net profit

The difference between operating profit and interest and exceptional items

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78

Profit for the year margin or net profit margin

Net profit after tax, expressed as a percentage of revenue/turnover

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79

Statement of comprehensive income

A financial document showing a company's income and expenditure over a particular time period, usually one year

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80

Revenue or turnover

The total income of a business resulting from sales of goods or services

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81

Acid test ratio

Similar to the current ratio but excludes stocks for current assets. A more severe test of liquidity.

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82

Assets

Resources that belong to a business

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83

Capital

Money put into the business by the owners

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84

Current assets

Liquid assets ie those assets that will be converted into cash within one year

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85

Current liabilities

Money owed by the business that must be repaid within one year

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86

Current ratio

Assesses whether or not a business has enough resources to meet any debts that arise in the next 12 months. It is found by dividing current liabilities into current assets.

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87

Intangible assets

Non-physical assets, such as brand names, patents and customer lists

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88

Inventories

Stocks, such as raw materials and finished goods held by a business

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89

Liabilities

Money owed by the business to banks and suppliers, for example

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90

Liquidity

The ease with which assets can be converted into cash

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91

Net assets

Total assets - total liabilities

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92

Non-current assets

Long-term resources that will be used by the business repeatedly over a period of time

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93

Non-current liabilities

Money owed by the business for more than one year, sometimes called long-term liabilities

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94

Shareholders' equity

The amount of money owed by the business to the shareholders

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95

Statement of financial position (balance sheet)

A summary at a particular point in time of the value of a firm's assets, liabilities and capital

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96

Trade and other payables

Money owed by the business to suppliers and utilities, for example. Sometimes called trade creditors

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97

Trade and other receivables

Money owed to the business by customers and any prepayments made by the business

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98

Working capital

The funds left over to meet day-to-day expenses after current debts have been paid. It is calculated by subtracting current liabilities from current assets

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99

Administration

A failing business appoints a specialist to rescue the business or wind it up

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100

External factors

Factors beyond the control of businesses cause it to collapse

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