Upgrade to remove ads
Unit 3 IB Business
Terms in this set (41)
Role of finance for businesses
Capital Expenditure and Revenue Expenditure
the function of business that involves money management for the businesses activities
the finance spent on fixed assets
assets that are relatively permanent, such as land, buildings, and equipment
refers to the payment for the daily running of the business, wages, rent ,electricity
Internal sources of finance
Finance which is obtained within the business such as retained profit or the sale of assets, personal funds
Main source of finance for sole traders and partnerships. Consists of using their own money for the business.
the profit that remains after a business has paid corporation tax to the government and dividends to shareholders. The profit is kept back in the business and used to pay for investment in the business.
Sale of assets
A method of raising short term finance by disposing of dormant business assets in return for cash
External sources of finance
getting funds from outside the organization, e.g. through debt (overdrafts, loans and debentures), share capital, or the government.
medium to long term sources of finance obtained from commercial lenders such as banks. Interest charges are imposed. The amount borrowed is paid back in instalments over a period such as 5,10, or 25 years
a secured loan for the purchase of property such as land or buildings
business development loan
Catered to meet the specific development needs of the borrower. Businesses can use these highly flexible loans to start or expand their business, buy equipment, and other assets.
long term loans issued by a business. Debenture holders (individuals, bus, gov) receive interest payments even if the business makes a loss and before shareholders are paid any dividend
This allows a business to temporarily overdraw on its bank account, take out more money than it has in its account. Overdrafts are commonly used when businesses have minor cash flow problems
source of finance that allows business to buy now and pay later. Although sale is made at the time of purchase, the seller or credit provider does not receive any cash from the buyer until a later date.
refers to the government financial gifts to support the business activities. Usually offered to eligible businesses as one-off payments and do not need to be repaid
a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive. Focus is to provided extended benefits to society
People or organizations that owe money to the business.
debtors who are unable to repay the money owed
a financial service that allows a business to raise funds based on the value owed by their debtors
A form of hiring whereby a contract is agreed between a leasing company (the lessor) and the customer (the lessee). The lessee pays rental income to hire assets from the lessor, who is the legal owner of the assets.
allows a business to pay its creditors in instalments, perhaps over 12 or 24 months
money provided by large investors to finance new products and new businesses that have a good chance to be very profitable. Form of high risk capital, usually in the form of loans or shares.
return on investment
Return on investment is a ratio between net profit and the cost of investment. A high ROI means the investment's gains compare favorably to its cost.
a formal written document that describes the nature of a business and how it will operate. It shows its long-term aim and purpose.
wealthy individuals who choose to invest their own money in businesses that offer high growth potential, high risk business ventures
Short term finance
refers to the current tax year. in terms of external sources of finance this means anythign that ahs to be repaid to a creditor within the next 12 months
medium term finance
refers to the time period of more than 12 months but less than 5 years. Include commercial loans or hire purchase agreements in excess of a year
long term finance
refers to any period of 5 years or longer, the longer the time period in question the harder it becomes to plan efficiently
refers to the expenditure in producing the shirt, not the amount paid by the customer
costs of production that a business has to pay regaurdless of how much it produces or sells, (ex- rent, bank loans,intrest payment)
costs of production that change in proportion with the level of output or sales
contain an element of both fixed and variable costs. Tend to change only when production or sales exceed a certain level of output
related to an individual project or the output of a particular product, without which the costs would no be incurred.
Indirect costs (overheads)
those that cannot be clearly traced to the production or sale of any single product. (ex-rent, lighting)
the money coming into a business usually from the sale of goods or services.
Sales Revenue Formula
Sales revenue = Quality sold x Selling price
represents the cash a company generates from each customer segment
refers to the sum of money that remains after all direct and variable costs have been taken away from the sales revenue.
YOU MIGHT ALSO LIKE...
3.1: Sources of Finance
Sources of Finance Unit 3.1
3.1 Sources of Finance
Unit 5 - 5.1 Business Finance
OTHER SETS BY THIS CREATOR
SAT Prep vocab
IB US History EOC
Unit 3 IB Business Summary
Imperialism and WWI Test
OTHER QUIZLET SETS
MSLC - RIP
US History II Ch. 15 & 16 Midterm
Mark 4350 Exam 2