Business Finance

Cash Flow Statement

A document which shows where cash used by the business has come from and how it has been used. (The closing balance for the previous month is the opening balance for the next month).

Turnover

All the money coming into the business, also called 'Sales Revenue'.

Interest

An amount of money which has to be paid on borrowed money.

Net Current Assets

Current assets less current liabilities. This is the same as net working capital.

Current Liabilities

Debts of the business which will usually have to be repaid in 12 months.

Budget

Determined by the business as a way of helping to control what it does and used as a means of setting a target.

External Finance

Finance obtained from OUTSIDE the business.

Internal Finance

Finance obtained from WITHIN the business.

Cash Flow

Flow of money into and out of the business.

Net Profit

Gross profit minus expenses.

Current Assets

Items which are owned by the business which tend to change in value on a daily basis and which can be changed into cash fairly easily.

Fixed Assets

Items which can be used more than once and which do not tend to change in value on a daily basis.

Long-Term Liabilities

Money owned by the business which is not normally due for repayment within the next 12 months.

Expenditure

Money which the business pays out.

Income

Money which the business receives.

Positive Cash Flow

More cash is flowing into the business than is flowing out of it.

Negative Cash Flow

More cash is flowing out of the business than is flowing into it.

Creditors

People or organisations that are owed money.

Debtors

People or organisations that owe money.

Sale Revenue (Turnover)

Quantity of goods sold multiplied by the selling price.

Gross Profit

Sales revenue minus cost of sales.

Balance Sheet

Shows exactly how much a business is worth on a stated day. A statement of what the business owns and owes on a given date. (One moment in time, the assets and liabilities for a business change all the time). The 'balance sheet' provides information on what the business owns, these are called 'Assets'. It also shows where the money has come from and how much it owes, these are called 'Liabilities'. Add Everything together but only Minus the Current Assets from the Current Liabilities.

Profit & Loss Account

Shows how much profit a business makes during the whole year after expenses are taken away.

Liquidity

The ability of a business to pay off its debts at short notice.

Profit

The amount of money left over once the costs of that activity have been paid for. (cost of goods and expenses) Profit is sometimes used to measure how successful a business activity has been.

Net Working Capital

The amount of money which a business has to manage and fund day to day affairs.

Operating Profit

The amount of profit which the business has made on its main activities.

Dividends

The part of a company's profit paid out to shareholders.

Depreciation

The process of reducing the value of fixed asset/s.

Corporation Tax

The tax which private and public limited companies must pay on their profits.

Sources Of Finance

Where the businesses get money from internally or externally and whether it's needed for the short term or long term.