Unit 3 - Accounts and Finance Flashcards Preview

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Flashcards in Unit 3 - Accounts and Finance Deck (105)
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1

average rate of return ARR

calculates the average annual profit of an investment project

2

acid test ratio

liquidity ratio that measures the ability of a firm to meet its debts within the next 12 months, but it ignores stock because not all stock can be easily turned into cash in the short-run

3

appropriation account

final section of the P&L account and shows how the profits after tax are distributed between the owners and as retained profits

4

assets

items with a monetary value that belong to a business; they can either be fixed assets (e.g. machinery, tolls, buildings) or current assets (e.g. cash, stock, debtors)

5

book value

value of an asset as shown on a balance sheet

6

budget HL

financial plan of expected revenue and expenditure for an organisation or a department for a given time period

7

budget holder HL

person, usually a middle or senior manager, placed in charge of a budget who is responsible and accountable for all revenue and expenditure within the allocated budget

8

budgetary control HL

process of investigating any differences between budgeted figures and actual figures

9

business angels

wealthy entrepreneurs who risk their own money in small to medium sized businesses that have high growth potential

10

capital employed

value of all long-term sources of finance for a business, e.g. bank loans, share capital, reserves

11

cash

actual money a business has received from selling its products and exists in form of cash in hand (cash held in the business) or cash at bank (cash held in a bank account)

12

cash flow

movement of money into and out of an organisation; cash inflows mainly come from sales revenue, cash outflows mainly from expenditures

13

cash flow forecast

financial document that records the actual cash inflows and outflows for a business over a specified trading period

14

closing balance

value of cash left in a business at end of the month, as shown in its cash flow forecast

15

costs of goods sold COGS

(= direct costs = variable costs) costs that are directly linked to the production, e.g. costs of raw material

16

creditor days ratio HL

efficiency ratio that measures the average number of days it takes for a business to pay its creditors

17

creditors

individuals or organisations that have sold goods or services on credit and will collect this money within the next 12 months

18

contingency fund

reserve budget that is set aside for emergency and back-up use

19

current assets

resources owned by a business and intended to be used within the next 12 months, e.g. cash, debtors, stocks

20

current ratio

efficiency ratio that shows the ability of a firm to meet its debts within the next 12 months

21

debentures

type of long-term loan with fixed annual interest payments which are repayable on maturity

22

debt factoring

financial service whereby a factor (such as the bank) collects debts on behalf of other businesses, in return for a fee

23

debtor days ratio HL

efficiency ratio that measures the average number of days it takes to collect the money owed from debtors

24

debtors

customers who have purchased goods or services on credit, so owe the business money which is collected within the next 12 months

25

depreciation

fall in the value of fixed assets, due to wear and tear or out of fashion

26

expenses

(= overheads = indirect costs = fixed costs) costs which are not directly linked to the production, e.g. costs of rent, advertising

27

discounted cash flow HL

reduces the value of money a business receives in future years

28

external sources of finance

getting sources of finance from outside the organisation, e.g. overdrafts, loans

29

final accounts

annual financial statements that all limited companies are legally obliged to report; these include balance sheet, trading account, profit and loss account

30

first-in first-out HL

FIFO values stock based on the order in which they were purchased