Sources of Finance
An external short term source of finance that involves a firm's bank account dropping below zero in the form of a short-term loan
What is an overdraft?
Price x Quantity
What is revenue (total revenue)?
The time taken for a business as cash exits to pay suppliers, then return as cash income from debtors
What is the working capital cycle?
The measure of a firms ability to generate profit from its core operations
What is the gross profit margin?
Fixed cost / contribution per unit
What is the break-even quantity?
An internal source of finance that draws on a company's unused surplus from prior years
What is retained profits?
An total on the balance sheet that must always equal the total equity of the business
What is net assets?
Offering too much credit to too many customers, causing cash flow problems
What are poor credit controls?
The measure of a firm's ability to generate profit from its long-term sources of finance
What is return on capital employed (ROCE)?
Units sold - Break-even quantity
What is the margin of safety (MOS)?
A medium-long term external source of finance that involves receiving investment from a successful business person in addition to experience, networks and business advice
What is a business angel?
The total used on the profit and loss account to calculate the tax expense
What is net profit before tax?
The difference between the cash inflows and cash outflows on a cash flow forecast
The generally accepted level of current assets compared to current liabilities when measuring the liquidity of a business over one year.
What is 2:1?
The name for the number of units needed to achieve a desired financial surplus
What is target profit output (TPO)?
The use of an asset to secure loan capital, minimising the risk to the lender should the business be unable to repay the loan
What is collateral?
Cash, Stock and debtors collectively
What are current assets?
To name given to customers that are provided trade credit
What are debtors?
The accepted maximum level of loan capital of a firm in relation to its sum of long-term sources of finance (HL)
What is 50%?
Total revenue - Total variable costs
What is total contribution?
The process of accessing large amounts of finance from investors by converting to a public limited liability via the stock exchange
What is an initial public offering (IPO)?
The sum of the loss of value of a fixed asset over time
What is accumulated depreciation? (not depreciation)
The name given to an outstanding customer debt that will not be recovered.
What is a bad debt?
A method to measure the ability of a firm to meet its immediate-term (1 month) debt obligations.
What is the acid-test (quick) ratio?
When total costs = total revenue
What is the Break-even point (BEP)?