Finance Definitions

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  • Created by: Charlotte
  • Created on: 03-12-13 12:25
Goals of the financial and accounting department of the business
Financial Objectives
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A financial objective focused on maintaining a healthy cash balance
Cash Flow Targets
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The financial rewards to a shareholder in return for their investment
Shareholder Returns
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The maximum % return a business strives to achieve from the capital employed in business activities
ROCE Target
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Looking at all costs for areas where savings can be made without affecting customer satisfaction
Cost Minimisation
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A financial document that summarises the net worth of a business
Balance Sheet
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A financial document that summarises a business' trading activitity and expenses to show whether is has made a profit or a loss
Income Statement
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A measure of a firm's ability to meet day-to-day expenses
Working Capital
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Profit after cost of sales has been deducted
Gross Profit
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Profit after all other expenses have been deducted
Operating Profit
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How profit is being used
Profit Utilisation
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The sustainability of profit
Profit Quality
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The total amount of money being utilised in the business from share capital and retained profit
Total Equity
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Items of value owned by the business that are likely to be kept for more than a year
Non-Current Assets
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Resources owned by the business whose value varies as a result of daily basis activities
Current Assets
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Financial obligations of the business payable within 12 months
Current Liabilities
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Debts that the business has more than one year to repay
Non-Current Liabilities
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An accounting practice which allows the value of a fixed asset to be spread over its useful life
Depreciation
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A business' ability to meet short-term cash payments on time
Liquidity
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A measure of the ability of abusiness to meet short-term debts
Current ratio
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A measure of the ability of the byusiness to meet short-term debts from liquid assets
Acid Test
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The relationship between a business' profits and sales revenue
Profitability
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A measure of how efficiently a business is using its capital to generate profits
ROCE
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Payment received by shareholders by the business
Dividend
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Someone who invests into a business' activities
Shareholder
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A measure of how effectively a business is using its assets to generate sales
Asset Turnover
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A measure of how many times per year a business turns over its stock through sales
Inventory Turnover
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A measure of the average number of days taken to pay suppliers
Payables Days
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A measure of the average number of days taken by a business to collect its debts from customers
Receivables Days
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The % of capital employed that comes from non-current liabilities
Gearing Ratio
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The number of pence per share received per shareholder
Dividend Per Share
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A measure of the return received on an investment, expressed as a % of the current market price of the share
Dividend Yield
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The long-term financial plan of action to achieve the financial objectives of the business
Financial Strategies
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A section of a business which costs and revenue, and therefore profit, can be identified
Profit Centres
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The purchase of assets that will remain in the business in the medium to long-term, accounted for in the balance sheet
Capital Expenditure
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The process of analysing the financial merits of possible future investment
Investment Appraisal
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The calculation of how long it will take to recoup the cost of an initial investment
Payback Period
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Average annual profit expressed as a % of initial investment
Average Rate of Return (ARR)
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The total net return of an investment stated in today's monetary value
Net Present Value (NPV)
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Other cards in this set

Card 2

Front

A financial objective focused on maintaining a healthy cash balance

Back

Cash Flow Targets

Card 3

Front

The financial rewards to a shareholder in return for their investment

Back

Preview of the front of card 3

Card 4

Front

The maximum % return a business strives to achieve from the capital employed in business activities

Back

Preview of the front of card 4

Card 5

Front

Looking at all costs for areas where savings can be made without affecting customer satisfaction

Back

Preview of the front of card 5
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