Business Studies Key Terms Unit 3.3 Effective Financial Management

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Cash Flow
The flow of cash into and out of a business
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Financial Management
Deliberately changing monetary variables like cash flows to achieve financial objectives such as improved cash flows
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De-Stocking
Reducing the levels of stocks in a business
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Trade Credit
Where a supplier gives a customer a period of time to pay for a bill (or invoice) for goods or services once they have been delivered
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Profit
Occurs when the revenues of a business are greater than its costs over a period of time
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Revenues
The amount of money received from selling goods or services over a period of time
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Break-Even Point
The level of output where total revenues are equal to total costs; this is where neither a profit nor a loss is being made
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Total Revenue
The revenue earned by a business from the sale of a given quantity of products. It is equal to quantity sold x average price
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Total Costs
All the costs of a business; equal to fixed costs plus variable costs
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Fixed Costs
Costs which do not vary with the amount produced, such as rent, business rates, advertising costs, administration costs and salaries
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Variable Costs
Costs which change directly with the number of products made by a business, such as the cost of buying raw materials
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Break-Even Chart
Costs which change directly with the number of products made by a business, such as the cost of buying raw materials
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Margin Of Safety
The amount of output between the actual level of output where profit is being made and the break-even level of output; if the margin of safety is zero, then production is at or below the break-even level
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Financing a Business
How a business obtains money and other financial resources to start up, expand and if necessary pay off losses it has made
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Internal Sources of Finance
Finance which is obtained within the business such as retained profit or the sale of assets
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External Sources of Finance
Finance which is obtained from outside the business such as bank loans and cash from the issue of new shares
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Retained Profit
Profit which is kept back in the business and used to pay for investment in the business
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Equity/ Share Capital
The monetary value of a business that belongs to the business’ owners. In a company, this would be the value of their shares
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Share
A part ownership in a business; for example a shareholder owning 25 per cent of the shares of a business owns a quarter of the business
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Overdraft
Borrowing money from a bank by drawing more money than is actually in a current account. Interest is charged on the amount overdrawn
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Bonds
A long-term loan where typically interest is paid at regular intervals like a year and the loan is all repaid at the end of the life of the bond. Bonds are traded on stock markets
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Card 2

Front

Deliberately changing monetary variables like cash flows to achieve financial objectives such as improved cash flows

Back

Financial Management

Card 3

Front

Reducing the levels of stocks in a business

Back

Preview of the back of card 3

Card 4

Front

Where a supplier gives a customer a period of time to pay for a bill (or invoice) for goods or services once they have been delivered

Back

Preview of the back of card 4

Card 5

Front

Occurs when the revenues of a business are greater than its costs over a period of time

Back

Preview of the back of card 5
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