Personal and Business Finance Key Terms

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  • Created by: Melissa
  • Created on: 22-07-17 10:03
Interest Rate
Proportion of an amount that is charged as interest to the borrower
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Debt
Money owed
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Credit Rating
A score given to individuals on how likely they are to repay debts based on previous actions
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Bankrupt
When an individual or organisation legally states its inability to repay debts
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Solvent
The ability to meet day-to-day expenditure and repay debts
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Current Account
An account with a bank or building society designed for frequent use e.g. Regular deposits and withdrawals
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Overdraft
The ability to withdraw money that you do not have from a current account
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Expenditure
The amount of money you need to cover all your expenses/outgoings e.g. Mortgage and bills
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Shareholder
Someone who has invested in a company for equity i.e. A share of the business
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Saving
Placing money in a secure place so that it grows in value and can be used in the future
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Investment
Speculative commitment to a business venture in hope that it generates a financial reward in the future
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Insurance
An agreement with a third party to provide compensation against financial loss in line with conditions laid down in the policy agreement
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Premiums
Regular payments made by an individual or company to an insurance provider in return for protection
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Financial Transactions
Actions by a business that involve money either going into or out of the business e.g. Making a sale or paying a bill
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HM Revenue and Customs (HMRC)
HM is an abbreviation for Her (or His) Majesty's, and the HMRC is a British government department responsible for the collection of all types of taxes
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Fraud
When an individual acquires company money for personal gain, through illegal actions
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Profit
Surplus achieved when total revenue (income) from sales is higher than the total costs of a business
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Loss
Shortfall suffered when total revenue from sales is lower than the total costs of a business
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Gross Profit
Sales revenue minus cost of good sold
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Cost of Goods Sold
The cost of the actual materials used to produce the quantity of goods sold
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Sales Revenue
Quantity sold multiplied by selling price
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Net Profit
Gross profit minus other expenditure e.g. Rent and advertising
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Trade Receivables
Money owed to the business from sales not yet paid for
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Trade Payables
Money the business owes from supplies purchased but not yet paid for
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Fixed Assets
Items of value owned by a business that are likely to stay in a business for more than 1 year. Also known as non-current assets
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Asset
Any item of of value owned by an individual or organisation
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Commission
A fee paid to a salesperson in exchange for services in facilitating or completing a transaction.
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Capital Items
Assets bought from capital expenditure e.g. Machinery and vehicles that will stay in the business over 1 year
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Statement of Financial Situation
A financial document showing the net worth of the business, by balancing its assets against its liabilities. Often called a balance sheet
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Capital Income
Money invested by owners or investors and normally used to buy non-current assets. Also known as fixed assets
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Revenue Income
Money that comes into the business from day-to-day activities e.g. Selling products or services
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Capital Expenditure
Money used to purchase non current assets and include tangible and intangible assets
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Revenue Expenditure
Spending on day-to-day items. Also shown on the Profit and loss account (Statement of Comprehensive Income) Will include rent and rates, heating and lighting and Administration costs
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Depreciation
An accounting technique used to spread the cost of an asset over its useful life
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Internal Sources of Finance
Money available to fund expenditure from within the business
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External Sources of Finance
Money available to fund expenditure from outside the business e.g. Loans, Crowd-funding
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Cash Flow Forecast
A document showing the predicted flow of cash into and out of the business over a given period of time, normally 12 months
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Opening Balance
Amount of cash available in the business at the start of a set time period, for example at the beginning of e month
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Closing Balance
Amount of cash available at the end of a set time period, for example at the end of the month
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Credit Period
The length of time given to customers to pay for goods or services received
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Liquidity
Measures a firms ability to meet Short-term cash payments
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Insolvent
When a firm is unable to meet Short-term cash payments
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Break-even
The point where the business is not making a profit or a loss
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Statement of Comprehensive Income
Also known as a profit and loss account. Calautes gross profit and net profit or loss for the year
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Statement of Financial Position
A snapshot of a businesses net worth at a particular moment in time. Also known as a balance sheet. Includes assets and liabilities
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Capital Employed
Total amount of capital tied up in the business at a particular point
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Current Assets
Items of value owned by the business, whose value is likely to fluctuate on a regular basis. This includes inventories, trade receivables, prepayments, cash in the bank and cash in hand
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Current Liabilities
Something owed by the business and will be paid in under 1 year e.g. Overdrafts, accruals and trade payables
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Net current assets/liabilities
The businesses ability to meet short term debts. Also known as Working Capital
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Non-current Liabilities
Something the business owes, but will be paid in over 1 year e.g. A loan or mortgage
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Net Assets
A figure that represents the total value of all assets minus the value of all liabilities
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Stakeholder
Anyone with an interest in the activities of a business. This can be directly or indirectly e.g. Employees and the community
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Illiquid
Not easily converted into cash e.g. Inventory
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Business-to-business
B2B, when one businesses sells to another business
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Business-to-consumer
B2C, when one business sells to an individual (customer)
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Other cards in this set

Card 2

Front

Money owed

Back

Debt

Card 3

Front

A score given to individuals on how likely they are to repay debts based on previous actions

Back

Preview of the back of card 3

Card 4

Front

When an individual or organisation legally states its inability to repay debts

Back

Preview of the back of card 4

Card 5

Front

The ability to meet day-to-day expenditure and repay debts

Back

Preview of the back of card 5
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