Sources of finance
Funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet.
What is crowdfunding?
Finance needed by business to pay its day-to-day costs which do not involve the purchase of long-term, fixed assets” (wages, bills, materials)
What is working capital?
The total amount of money business earns from selling its products
What is revenue?
Resources which are owned by a business.
What are assets?
The ratio between gross profit and revenue
What is gross profit margin?
Short term loan from bank that allows a business to spend more money than it has in its account up to an agreed limit. The loan must be repaid within 12 months.
What is an overdraft?
The ability of a business to pay its short-term debts, enough working capital
What is liquidity?
The direct costs of producing the goods sold by a
company: costs of material & production labor
What is cost of goods sold (cost of sales)?
Debts of business that will have to be paid sometime in the future.
What are liabilities?
Ratio between profit before tax and revenue
What is (net) profit margin?
Selling trade receivables to improve business liquidity, short term finance
What is debt factoring?
The time it takes from buying raw materials, making these into goods for sale, finding buyers for them and receiving payments from customers.
What is the working capital cycle?
The day-to-day operating expenses of a business,
but not directly related to creating a product.
What are overhead costs?
Resources that the business owns and expects to convert to cash before the date of the next balance sheet (up to 1 year).
What are current assets?
Ratio between current assets and current liabilities
What is the current ratio?
Agreement between a business and its supplier that the business can pay for the supplied materials at agreed time in the future, buy now and pay later
What is trade credit?
An estimate of future cash inflows and cash outflows of a business.
What is a cah flow forecast?
The difference between revenues and direct production costs (cost of sales).
What is gross profit?
Long-term debts of the business which will be payable in more than one year.
What are non-current liabilities?
Ratio between liquid assets and current liabilities
What is the acid test ratio?
Certificates or bond issued by a company to
raise long-term finance usually at fixed rate of interest
What are debentures?
The amount of cash held by the business at the end of each month.This becomes next month’s opening cash balance.
What is the closing balance?
Profit remaining after all expenses, tax and dividends have been paid, which is then reinvested back into the business.
What is retained profit?
Money invested by owners (own savings, retained profit, shareholders money for PLCs)
What is equity?
ROCE
What is return on capital employed?