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Glossary of terms - applied business unit 1
Terms in this set (93)
A tough measure of a business' solvency i.e. its ability to meet short term debts without the use of inventory. Current assets - inventory/current liabilities.
Financial measures of how efficiently management are utilising finance and other resources within the business to generate a return.
The difference between the budgeted figure and the actual figure is bad for the business i.e. it has a negative impact upon profit.
An activity ratio that measures how efficiently the assets of the business are being utilised to generate revenue. Revenue/net assets
Items of value owned by a business.
The level of output at which the business is making neither a profit nor a loss i.e. the point at which Total Cost = Total Revenue. Fixed costs/(selling price - variable cost)
A numerical technique used by businesses to identify the number of units necessary to achieve an equilibrium where total costs = total revenue.
A target amount of money set by a business to be achieved (sales) or adhered to (expenditure) in a specific period of time.
The process of setting objectives, carrying out research, producing financial forecasts and making business decisions prior to trading.
A new business venture.
Spending by businesses on fixed assets e.g. machinery and vehicles that will be used by the business on an ongoing basis.
The liquid assets owned by a business that can be used immediately in day to day transactions.
The movement of cash into and out of a business over a period of time.
Community interest groups
Non-profit organisations with an aim to support a specific cause or benefit for the well-being of society.
The amount of money each unit sold contributes towards fixed costs and once break-even has been achieved then contributes to profit.
The process of investigating the effect of changes in selling price and variable costs on the break-even level of output.
Business organisations that are owned by and operate for the wellbeing of their members.
All expenditure incurred by a business as part of its operations.
A measure of a business' solvency and short term survival i.e. its ability to meet short term debts and day to day expenses. Current assets/current liabilities
Day to day financial obligations
The day to day cash outflows a business needs to meet to survive.
The willingness to undertake new ventures and show initiative with a view to gaining rewards.
The value of shareholders' funds, made up of share capital plus retained profit.
Any spending by a business i.e revenue and capital.
A target amount of money a business or function is permitted to spend in a given period of time.
External source of finance
The funds that are invested into the business that come from outside of the business.
The difference between the budgeted figure and the actual figure is good for the business i.e. has a positive impact upon profit.
Quantitative information that relates to the financial performance of a business.
The monetary targets a business wants to achieve in a given time period.
Comparisons made between two or more figures in a set of accounts.
Costs to a business that stay the same regardless of output.
A measure of the proportion of a business' capital that is funded through long term loans (debt v. equity). Non-current liabilities/tota equity + non-current liabilities x 100
Profit after cost of sales has been deducted from sales revenue but before expenses are deducted. Sales revenue - cost of sales
Gross profit margin
A measure of profitability that shows gross profit expressed as a percentage of sales revenue. Gross profit / sales revenue x 100
The money coming into a business e.g. a community interest group.
A target amount of money to be received from sales in a given period of time.
Income statement (profit and loss acccout)
A formal financial document that summarises a business' trading activities and expenses to show whether the business has made a profit or a loss in a given period of time.
The identificcation of trends in a particular type of market e.g. the car industy.
Internal source of finance
The funds used by a business that come from within the organisation.
Inventory (stock) turnover
A ratio that measures how frequently a business turns over its inventory in a year. Cost of sales x average inventory
The type of legal structure that an organisation takes.
The type of legal ownership that an organisation takes.
Anything that a business owes and therefore creates a debt to a third party.
An investor's financial commitment is limited to the total amount invested or promised in share capital.
Limited liability partnership (LLP)
A form of partnership that does not have unlimited liability but can carry other disadvantages such as greater administration placed on the business.
Long term financing
The finance that is employed by the business for a period greater than 5 years.
Individuals with responsibility who are in charge of a number of subordinates.
The percentage increase in the size of a market i.e. in a given period of time by how much the market is growing in terms of value or volume.
Quantitative information about features and trends within a given market.
The process of gathering and analysing primary or secondary research in order to inform decision making.
The proportion of total market sales that a particular business has.
The total value or volume of sales in the market.
Identifiable patterns in business and consumer behaviour as they change over time.
Net cash flow
The balance of cash inflows to cash outflows in one period of time e.g. a month's total cash inflows in relation to the total cash outflows.
Profit after all other expenses have been deducted from gross profit. Gross profit - expenses
Operating profit margin
A measure of profitability that looks at the relationship between sales revenue and operating profit, expressed as a percentage. Operating profit/sales revenue x 100
Investors who are part owners of a company.
Where two or more people share the costs, risks and responsibilities of being in business together.
Money going out of a business to pay suppliers.
Individuals or organisations who are interested in providing finance to a business in the future.
Individuals or organisations who are interested in providing finance to a business in the future.
Private limited companies
An incorporated business that is owned by shareholders who tend to be family and friends of the entrepreneur.
The surplus money made by a business when revenue exceeds costs. Total revenue - total costs
A target amount of surplus (total revenue - total costs) to be achieved by a business in a specific period of time.
The difference between total revenue and total costs.
A measure of the efficiency of a business in generating profit.
Financial ratios that measure the efficiency of a business in generating profits by comparing two or more related variables.
Public limited companies
An incorporated business that is able to sell shares on a stock exchange.
Formal records that summarise a business' financial performance, activities and worth over a specific period of time.
Any money coming into a business.
The money coming into a business from the sale of goods or services. Selling price x quantity
Spending by businesses for day to day activities e.g. wages and utilities.
Return On Capital Employed (ROCE)
A profitability ratio that measures how efficiently a business is using capital employed to generate profits. Operting profit/total equity + non-current assets x 100
The costs of operating the business on a day to day basis.
Costs that are partly fixed and partly variable.
An individual who owns and runs their own business.
The ability of a business to meet day to day expenses and short-term debts.
Financial ratios that measure the ability of a business to meet short term debts and hence survive.
The requirements, views and aims of each individual or group that is affected by the actions of a business.
Anyone with an interest in the actions of a business.
The costs involved in setting up the business.
Statements of financial position (balance sheets)
A formal financial document that summarises the net worth of a business at a given point in time.
Businesses within the supply chain responsible for providing goods or services to other businesses.
The difference between income and expenditure.
The total amount of money contributed first towards fixed costs and then profit from all goods and services sold.
All of the costs (Fixed Costs + Total Variable Costs) associated with the provision of a good or service.
The total amount of money (Selling Price X Quantity) coming into a business from the sale of goods or services.
Trade payables (creditor) payment period
An activity ratio that measures how long it takes on average for the business to pay for supplies it has purchased on credit. Payables/cost of sales x 365
Trade receivables (debt) collection period
An activity ratio that looks at how long it takes on average for customers to pay the business for goods or services it has purchased on credit. Receivables/sales revenue x 365
The owners of a business are responsible for the total amount of debt of the business.
Costs to a business that change in relation to output e.g. raw materials, wages and distribution costs.
The process of calculating and interpreting any differences between budgeted figures and actual figures. Budgeted figure - actual figure
What if analysis
The process of systematically changing variables to calculate a range of possible financial outcomes.
A measure of a business' solvency (Current Assets - Current Liabilities) i.e. its ability to meet day to day expenses.
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