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3.1 - 3.5 Business
Vocabulary
| Term | Definition |
|---|---|
| Business angels | wealthy/entrepreneurial investors who risk money in small to medium sized businesses that have high growth potential |
| capital expenditure | spending by businesses on fixed assets such as the purchase of land and buildings |
| creditors | individuals that the business owes money to |
| debentures | long-term loan to a business with the promise of fixed annual interest payments to the debenture holders |
| external financing | getting sources of finance from outside the organization |
| factoring | financial service whereby a factor (bank) collects debts on behalf of other business in return for a fee |
| leasing (hiring) | leasing company owns the equipment and hires it out to the customer |
| non-recourse debt factoring | financial service where a debt factor protects its customers against bad debts that they might incur |
| overdrafts | allows business to spend in excess of the amount in its account up to a predetermined limit |
| revenue expenditure | spending on a day-to-day running of a business |
| sources of finance | where or how businesses obtain their funds |
| working capital (net current assets) | day to day money that is available for the business |
| accounting rate of return | investment appraisal method that calculates the average annual profit of an investment project; expressed as percentage of the initial sum of money invested |
| discounted cash flow | investment appraisal technique that reduces the value of money that a business receives in future years |
| investment appraisal | financial decision-making tool that helps managers to assess whether certain investment projects should be undertaken based mainly on quantitative techniques |
| net present value | investment appraisal technique that calculates the total discounted cash flows, minus the initial cost of the investment project |
| payback period | investment appraisal technique which estimates the length of time that it takes to recoup the initial cash outflow of a project |
| qualitative investment appraisal | judging whether or not an investment project is worthwhile based on non-numerical factors; intuition rather than scientific decision-making |
| quantitative investment appraisal | judging whether or not an investment project is worthwhile based on numerical factors |
| assets | items owned by a business that have monetary value; can be fixed or current |
| cash | actual money a business has received from selling its products; cash in hand or cash at bank |
| cash flow | transfer or movement of money into and out of an organization |
| cash flow forecast | financial document that shows the predicted future cash inflows and cash outflows for a business over a trading period |
| cash flow statement | financial document that records the actual cash inflows and cash outflows for a business over a specified trading period |
| closing balance | value of cash left in a business at the end of the month; closing balance = opening balance plus net cash flow |
| current assets | resources that belong to a business that are intended to be used in the next twelve months (cash, debtors, stocks) |
| creditors | businesses that have sold goods or services on credit and will collect this money at a future date (accounts payable) |
| debtors | private customers or commercial customers who have purchased goods or services on credit and owe the business money (accounts receivable) |
| expenses | spending in working capital of a business (costs of productions, salaries, raw materials, rent, advertising) |
| liabilities | debts owed by a business |
| liquidity | ability of a business to convert assets into cash quickly and without a fall in its value |
| liquidity crisis | cash flow emergency situation where a business does not have enough cash to pay its current liabilities |
| net cash flow | cash that is left over after cash outflows have been accounted for from the cash inflows |
| overheads | costs not directly associated with the production process but necessary for providing and maintaining business operations (lighting, rent, security, insurance) |
| stocks (inventories) | physical goods that a business has in its possession for further production |
| budget | financial plan for expected revenue and expenditure for an organization for a given period of time |
| budget holder | a person who has been placed in charge of a budget |
| budgetary control | use of corrective measures taken to ensure that actual performance equals the budgeted performance |
| contingency fund | name given to a reserve budget that is set aside for emergency and backup use |
| master budget | overall or consolidated budget comprised of all the separate budgets within an organization |
| SMART budgeting | budgets that are specficic, measurable, agreed, realistic, and time constrained |
| variance | any discrepancy between actual outcomes and budgeted outcomes |
Created by:
randy_gardner
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