Business Revsion - Finance

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What is BACS?
BACS stands for banks automated clearing service, and is a way of transferring money between bank accounts automatically without using cash or cards. There are 3 types of money transfer; credit transfers, direct debits & standing orders.
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What is an advanatge of a direct debit and who sets it up?
Direct debits can be used for paying different amounts so it is useful for paying regular bills. It is set up by the business receiving the money (not the customer).
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What is a disadvantage of standing orders?
Standing orders can only be used for paying the same amount of money.
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Define START UP cost and name 3 examples
These are costs that have to be met before the business can start trading, and these wil differ according to the type of business. Examples are; cash register, fixtures and fittings and premises.
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Define RUNNING cost and name 3 examples
Once set up, the business will continue to buy resources so that it can keep producing goods and services, these are day to day costs that result from trading. Examples are; rent, raw materials, and employees wages.
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What is the formula to work out GROSS profit?
GROSS PROFIT = SALES - COST OF SALES
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What is the formula to work out RETAINED profit?
RETAINED PROFIT = NET PROFIT - TAX - DIVIDENDS
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What is a balance sheet and what does it show?
A balance sheet shows what a business ons, what it owes and the way it is financed on a particular date. It is sometimes said to be like a 'snapshot'.
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What are assets?
Assets are the resources owned by the business, and are used by the business in order to provide goods and services.
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What are CURRENT assets?
Current assets are liquid assets that a business owns. They are cash or assets that can be turned into cash fairly quickly. Examples are cash, debtors and stock.
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What is a debtor?
Debtors are people or businesses that owe the business money, debtors are current assets as the business usually gets the cash within 30 days.
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What are FIXED assets?
Fixed assets are bought by a business and often used over and over again, often for many years. If an asset is not going to be sold for at least one year, then it is called a fixed asset. Examples are; land, buildings, machinery and computers.
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What are liabilities?
Liabilities are the debts of the business. These are the funds it owes to other businesses or individuals. They are then creditiors of the business. Liabilities can be CURRENT LIABILTIES or LONG TERM LIABILTIES.
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What are CURRENT liabilities?
These are debts that are repaid within 12 months.
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What are LONG TERM liabilties?
These are debts that are repaid after 12 months.
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What is a trade creditor?
A trade creditor is a supplier that is owed money , most businesses have trade creditors, they are usually repaid within 30 days.
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What is capital?
Capital is funds provided by the owners to set up and run the business.
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What is the most imporant thing about a balance sheet?
ASSETS MUST EQUAL LIABILITIES!
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What happens if net current assets is negative?
If net current assets is negative then there is danger that the business could become bankrupt as it cannot pay its short term debts.
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What is the formula to work out NET ASSETS?
NET ASSETS = NET CURRENT ASSETS + FIXED ASSETS
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What is capital employed?
This is the money a business uses to pay for its assets and should be exactley equal to the value of its net assets.
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What is the formula for GROSS PROFIT MARGIN?
GROSS PROFIT MARGIN = GROSS PROFIT ÷ SALES × 100
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What is the formula for NET PROFIT MARGIN?
NET PROFIT MARGIN = NET PROFIT ÷ SALES × 100
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What does ROCE stand for, and what does it show?
ROCE stands for Return On Capital Employed. It shows the net profit a business makes in relation to its capital employed.
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What is the formula for ROCE?
ROCE = NET PROFIT ÷ CAPITAL EMPLOYED × 100
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What is the formula for WORKING CAPITAL?
WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES
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What is the formula for CURRENT RATIO?
CURRENT RATIO = CURRENT ASSETS : CURRENT LIABILITIES
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What is the formula for ACID TEST RATIO?
ACID TEST RATIO = CURRENT ASSETS - STOCK : CURRENT LIABILITIES
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Other cards in this set

Card 2

Front

What is an advanatge of a direct debit and who sets it up?

Back

Direct debits can be used for paying different amounts so it is useful for paying regular bills. It is set up by the business receiving the money (not the customer).

Card 3

Front

What is a disadvantage of standing orders?

Back

Preview of the front of card 3

Card 4

Front

Define START UP cost and name 3 examples

Back

Preview of the front of card 4

Card 5

Front

Define RUNNING cost and name 3 examples

Back

Preview of the front of card 5
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