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Finance

GCSE Business Finance

TermDefinition
Fixed Costs Costs which do not vary with the output produced such as rent, business rates, advertising costs, admin costs and salaries.
Total Costs All the costs of a business, it is equal to fixed costs plus variable costs.
Variable costs Costs which change directly with the number of products made by a business e.g. raw materials.
Revenue The amount of income received for selling goods and services.
Total revenue = Number of products sold X price
Total Costs = FC + VC
Profit = TR-TC
Cash Notes, coins and money in the bank.
Cashflow The flow of cash in and out of the business
Inflow The cash flowing into the business, its receipts.
Outflow The cash flowing out of the business, its payments.
Net Cash Flow The receipts minus its payments
Insolvency When a business can no longer pay its debts.
Cash Flow Forecast A prediction of how cash will flow through a business is a period of time.
Opening balance The amount of money in a business at the start of the month
Closing balance The amount of money in a business at the end of the month.
Cumulative cash flow The sum of cash that flows into a business overtime.
Trade credit Where a supplier gives a customer a period of time to p[ay a bill for goods and services once they have been delivered.
Stocks Materials that a business holds.
Business Plan A plan for the development of a business giving forecasts of items such as sales, costs and cash flow.
Long term finance Sources of money for businesses that are borrowed or invested for more than a year,
Short term finance Sources of money for businesses that are borrowed or invested for less than a year,
Share A part ownership in a business
Personal savings Money that has been set aside
Share capital The monetary value of a company which belongs to its shareholders.
Shareholders The owners of a company.
Venture Capitalist An individual or company which buys shares in what they hope will be a fast growing company with a long term view of selling the shares at a profit.
Loan Borrowing a sum of money which has to be paid back with interest over s period of time.
Collateral Assets owned by a business which are used to guarantee repayments of a loan.
Mortgage A loan where property is used as security.
Dividend A share of the profits of a company received by shareholders who own shares.
Retained profit Profit which is kept back in the business and used to pay for investment in the business.
Leasing Renting equipment or premises
Overdraft Borrowing money from a bank by drawing out more money than is actually in a current account. Interest is charged on the amount overdrawn.
Factoring A source of finance where a business is able to receive cash immediately for the invoices it has issued and sells the debts to a factor.
De Stocking Reducing the level of stocks in a business
Breakeven Point the level of output where total revenue are equal to total costs. Neither a profit or a loss is being made.
BEP= TFC/SP-VC
Breakeven chart A graph which shows total revenue and total costs, allowing the bep to be drawn.
Margin of safety The difference between the output and the breakeven point.
Contribution = SP-VC
Internal sources of finance Finance from within the business e.g. sale of assets
External sources of finance Finance from outside the business e.g. bank loan
Bonds A long term loan where typically interest is paid at regular intervals like a year and the bond is repaid at the end of the life of the bond. These are traded on the stock market.
Created by: dduguid
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