Unit 3 key words


Unit 3


  • Financial management is the process of producing and interpreting accounts that record a business’s expected or actual costs, revenue and profits. This helps managers to take good decisions.
  • Costs are the expenses pain by a business, such as its employees’ wages.
  • Revenue is the income received by a business from selling goods and services.
  • A budget is a financial plan for the future operations of the business. Budgets are used to set targets to monitor performance and control operations.
  • A business plan is a detailed statement setting out the proposals for a new business or describing the ways in which an existing business will be developed.
  • Cash flow is a measure of the amount of money moving into and out of a business over some time period.
  • A sole trader is a business owned and operated by a single person.
  • A company is any incorporated business.
  • A partnership is a group of between 2 and 20 people who contribute capital and expertise to an enterprise.
  • Shareholders are the owners of a company.
  • Limited liability provides protection for the owners of a company (normally the shareholders). They only risk the amount they have invested in the business in the event of its failure.
  • An external source of finance is an injection of capital into a business from individuals, other businesses or financial institutions.
  • An internal source of finance is one that exists within the business.
  • A share is a document representing part ownership of a company.
  • Trade credit is a period of grace offered by suppliers before payment for goods and services is due.
  • Assets are anything owned by a business from which it can benefit. Assets include land, vehicles, stocks and brand names.
  • Collateral is the security offered to back up a request for a loan. Usually this is in the form of property, as this is unlikely


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