SECTION 5
1. Start-up capital is the finance needed by a new business to pay for essential non-
current and current assets before it can begin trading
2. Working capital is the finance needed by a business to pay for its day-to-day
activities
3. Capital expenditure is money spent on non-current assets which will last for more
than one year
4. Revenue expenditure is money spent on day-to-day expenses which do not
involve the purchase of a long-term asset, for example, wages or rent
5. Internal finance is obtained from within the business itself
6. External finance is obtained from sources outside of and separate from the
business
7. Micro-finance is providing financial services - including small loans - to poor
people not served by traditional banks
8. Crowdfunding is 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
9. The cash flow of a business is the cash inflows and outflows over a period of
time
10. Cash inflows are the sums of money received by a business during a period of
time
11. Cash outflows are the sums of money paid out by a business during a period of
time
12. A cash flow cycle shows the stages between paying out cash for labour,
materials, and so on, and receiving cash from the sale of goods
13. Profit is the surplus after total costs have been subtracted from revenue
14. A cash flow forecast is an estimate of future cash inflows and outflows of a
business, usually on a month-by-month basis. This then shows the expected
cash balance at the end of each month
15. Net cash flow is the difference, each month, between inflows and outflows.
16. Closing cash (or bank balance) is the amount of cash held by the business at the
end of each month. This becomes next month's opening cash balance.
17. Opening cash (or bank balance) is the amount of cash held by the business at
the start of the month
18. Working capital is the finance needed by a business to pay for its day-to-day
expenses
19. Accounts are the financial records of a firm's transactions
20. Final accounts are produced at the end of the financial year and give details of
the profit or loss made over the year and the worth of the business
21. An income statement is a financial statement that records the income of a
business and all costs incurred to earn that income over a period of time. It is
also known as a profit and loss account
22. The revenue is the income to a business during a period of time from the sale of
goods and services
23. The cost of sales is the cost of producing or buying in the goods actually sold by
the business during a time period
24. A gross profit is made when revenue is greater than the cost of sales
25. A trading accounts shows how the gross profit of a business is calculated
26. Net profit is the profit made by a business after all costs have been deducted
from revenue. It is calculated by subtracting overhead costs from gross profits
27. Depreciation is the fall in the value of a fixed asset over time
28. Retained profit is the net profit reinvested back into the company, after deducting
tax and payments to owners, such as dividends
29. The statement of financial position shows the value of a business's assets and
liabilities at a particular time
30. Assets are those items of value which are owned by the business. They may be
non- current (fixed) assets or currents assets
31. Liabilities are debts owed by the business. They may be non-current liabilities or
currents liabilities
32. Non-current assets are items owned by the business for more than one year
33. Current assets are owned by the business and used within one year
34. Non-current liabilities are long-term debts owed by the business, repaid over
more than one year
35. Current liabilities are short-term debts owed by the business, repaid in less than
one year
36. Capital employed is shareholders' equity + non-current liabilities and is the total
long-term and permanent capital invested in a business
37. Liquidity is the ability of a business to pay back its short-term debts
38. Profitability is the measurement of the profit made relative to either the value of
sales achieved or the capital invested in the business
39. Illiquid means that assets are not easily convertible into cash
