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.
Sale Revenue (Turnover)
Quantity of goods sold multiplied by the selling price.
Gross Profit
Sales revenue minus cost of sales.
Net Profit
Gross profit minus expenses.
Sources Of Finance
Where the businesses get money from internally or externally and whether it's needed for the short term or long term.
Internal Finance
Finance obtained from WITHIN the business.
External Finance
Finance obtained from OUTSIDE the business.
Interest
An amount of money which has to be paid on borrowed money.
Profit & Loss Account
Shows how much profit a business makes during the whole year after expenses are taken away.
Turnover
All the money coming into the business, also called 'Sales Revenue'.
Opening Stock
The value of the stock which the business has at the beginning of the accounting period. The value is always the same as the closing stock from the previous accounting period. (Opening Stock + Purchases)
Closing Stock
The value of the stock which the business has at the end of the accounting period. The value of the closing stock is carried forward to the beginning of the next accounting period.
Operating Profit
The amount of profit which the business has made on its main activities.
Net Profit Before Tax
The amount of profits which the business has made on all activities after expenses have been paid and before paying tax.
Corporation Tax
The tax which private and public limited companies must pay on their profits.
Retained Profit
The amount of profit kept by the business for its own use.
Dividends
The part of a company's profit paid out to shareholders.
Ratios To Learn
Are used to measure how well the business is doing
Gross Profit To Sales
Gross Profit � Sales x 100
Net Profit To Sales
Net Profit � Sales x 100
ROCE
Operating Profit � Capital Employed x 100
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 wh
Liquidity
The ability of a business to pay off its debts at short notice.
Fixed Assets
Items which can be used more than once and which do not tend to change in value on a daily basis.
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.
Long-Term Liabilities
Money owned by the business which is not normally due for repayment within the next 12 months.
Current Liabilities
Debts of the business which will usually have to be repaid in 12 months.
Net Working Capital
The amount of money which a business has to manage and fund day to day affairs.
Net Current Assets
Current assets less current liabilities. This is the same as net working capital.
Net Assets Employed
The total value of all the assets owned by the business.
Capital Employed
The total value of all the long term finance provided to the business.
Creditors
People or organisations that are owed money.
Debtors
People or organisations that owe money.
Depreciation
The process of reducing the value of fixed asset/s.
Loan Capital
Money lent to a business, usually for a specific purpose. This may consist of bank loans or debentures.
Share Capital
Invested in the business by shareholders who are the owners of the business.
Cash Flow
Flow of money into and out of the business.
Cash Flow Forecast
The expected flow of money into and out of the business over a period of time.
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).
Income
Money which the business receives.
Expenditure
Money which the business pays out.
Balance Carried Forward
The amount of cash left at the end of the month. This amount is used at the beginning of the next month.
Balance Brought Forward
The amount of cash available at the beginning of the month which was left over at the end of the previous month.
(Cash Flow) Surplus
The amount of cash left when income is greater than expenditure. (Income > Expenditure)
Cash Deficit
The amount of cash which a business is short of, when expenditure is greater than income. (Expenditure > Income)
Negative Cash Flow
More cash is flowing out of the business than is flowing into it.
Positive Cash Flow
More cash is flowing into the business than is flowing out of it.
Budget
Determined by the business as a way of helping to control what it does and used as a means of setting a target.
Current Ratio
Calculated using the following formula: Current Assets � Current Liabilities.
Acid Test Ratio
Calculated using the following formula: Current Assets - Less Stock � Current Liabilities.