Core Finance Terms
What is cashflow?
The movement of money into and out of a business over a period of time.
What does efficiency mean in business?
Doing work in a way that saves time, money, or resources.
What is a transaction?
A business exchange where money is paid for goods or services.
How can marketing increase revenue?
Marketing attracts customers, increasing sales and income.
What kind of transactions does the business rely on?
Customer payments for services.
What is an invoice used for?
A document requesting payment for goods or services provided.
What is turnover?
The total value of sales made in a specific period.
What is a deposit, and why do companies ask for one?
A part-payment made in advance to secure a product or service.
How can better efficiency improve cashflow?
Better efficiency lowers costs and improves cash availability.
What costs might count as overheads for this company?
Staff costs, technology, marketing, platform maintenance.
What are overheads? Give one example.
Regular running costs not directly linked to production
(e.g. rent, salaries, utilities).
Why are savings important for a company?
Money a business keeps by reducing costs or spending less.
Give an example of a business risk.
Anything that could cause financial loss
(e.g. falling sales, high debt, market changes).
How can offering discounts affect margins and savings?
Discounts increase sales but reduce profit margins.
Where might cashflow problems appear?
Delayed payments, high fixed costs.
What is a business liability?
A financial responsibility or debt a business must pay.
What is a profit margin?
The percentage of profit made on sales.
How can poor cashflow increase financial risk?
It can prevent a business from paying bills, leading to debt or failure.
How can unpaid invoices become a serious liability?
Unpaid invoices reduce cashflow and become financial obligations.
What risks could affect long-term revenue?
Competition, loss of customers, ineffective marketing.
Explain the difference between revenue and profit.
Revenue is total income from sales; profit is what remains after costs are deducted.
Why is a high margin usually better than a low one?
A high margin means more profit per sale; it gives financial stability and flexibility.
Explain how high overheads can reduce efficiency and margins.
High overheads reduce efficiency and lower profit margins.
Explain how marketing decisions can increase or reduce financial risk.
Poor marketing wastes money; good marketing reduces financial risk.
Would efficiency or marketing investment be more important at this stage? Why?
Depends on stage of business; early efficiency stabilises finances, marketing drives growth.