Start Up Capital

money required to set up a business and keep the business operating until the business starts to break even

Overdraft

banks allow businesses to take additional money out of their account up to a certain limit

Loan

bank lends a fixed amount for an agreed time period, which must be repaid with interest

Equity Finanace

selling shares in the business to raise finance rather than borrowing

Debt Finance

borrowing money from a bank which must be re paid with interest

Micro Finance

lending small amounts of finance small business people to those who can’t access finance from another source

Crowd funding

raising finance by raising small amounts of money from a large number of people, usually via the Internet.

Trade Credit

– delaying payment to suppliers for an agreed time period

Cash Flow

cash used to pay short term debts (current assets - current liabilities)

Cash Flow

cash flow in and out of the business over a period of time

Cash flow forecast

Estimate of future cash inflows and outflows usually calculated month by month to ensure there is enough cash to pay short term debts

Net cash flow

Cash inflows - cash outflows

Profit

Sales revenue - total costs of making a product/service

Working Capital

- capital available to a business day to day to pay short term debts. Current Assets – current liabilities

Cash In Flow

Cash going into a business

Cash Out Flow

cash going out of the business

Short term finance

finance required for short periods usually less than one year

Long Term Finance

finance required for periods usually longer than one year

Sale of assets

selling equipment /machinery/inventory to finance the business

Retained Profit

reinvesting profits back into the business

Owners Savings

– using owners own savings to finance the business

Capital Employed

Money invested in a business (buildings, machinery)

Internal Sources of Finance

Finance sourced from inside the business - for example owner's funds, sale of assets and retained profit all are

Capital Expenditure

money spent by a business or organization fixed assets, such as land, buildings, and equipment.

Revenue Expenditure

money spent by a business or organization on day to day operating costs such as rent, insurance, heating, maintenance etc

Sale and Leaseback

Selling an asset for a capital sum and then leasing at an agreed rate from the buyer.

Fixed Cost

Costs that don't change with output.

Variable Costs

Costs that change with output.

Marginal Costs

the cost added by producing one additional unit of a product or service

Direct costs

A cost that can be directly tied to the production of specific goods or services

Indirect costs

A cost that can't be directly tied to the production of specific goods or services

Net assets

Total assets - Total Liabilities

Reserves

Liquid assets held by a bank, company or government in order to meet expected future payments and/or emergency needs

Window Dressing

Presenting the company accounts in a favourable light – to give the impression of a better financial position

Trade Receivables

the value of payments to be received from customers who have bought goods on credit

Trade Payables

value of debts for goods bought on credit payable to suppliers; also known as ‘accounts payables’.

Debt Factoring

With debt factoring, a business can raise cash by selling their outstanding sales invoices (receivables) to a third party (a factoring company) at a discount.