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Unit 5: Finance Management - Coggle Diagram
Unit 5: Finance Management
Fixed Assets:
money that is used on items that are used over a long period of time
Liquid Assets:
money spent on your daily activities
Start-up Capital:
money you invest initially in your company
Working Capital:
money made from your company that you reinject// back and forth
Internal Finance:
comes from within your company
External Capital:
comes from outside of the company
Short-Term Financing:
doing things, because you need the money immediately
Medium Term Financing:
money needed over a period of months
Long-Term Financing:
financing over a period of years
2 more items...
Loan Capital:
borrowing money
Share Capital:
a part of your company is bought
Hire Purchase:
pay over a period of time, but with a contract of how much you have to pay and when
Leasing:
not actually owning the capital, just renting it
Overdraft:
withdraw more from the bank than you have
Debt Factoring:
you sell your debt/ credit to someone else
Trade Credit:
pay over a period of time, delaying your payment
Loan Capital:
you borrow money from an institution, generally banks
Share Capital:
you sell parts of your business
Personal Funds:
money from the owner’s pockets
Retained Profits:
plowback// the cash that you made within the company that is reinvested
Sale of Assets:
liquidating fixed assets
Cost:
anything that flows out of your business
Fixed Costs:
are independent of the amount that a business produces
Variable Costs:
are dependent on the amount that a business produces
Semi-Variable Costs:
are fixed until a certain level of production/consumption, then become variable
Direct Costs:
requirements for producing
Indirect Costs:
part of the company’s costs, but not targeted towards goods or services
Revenue:
anything that flows into your business
Profit:
revenue- costs
Breaking Even:
point when a company achieves enough to cover its costs
Contribution:
how much is generated in a specific unit in terms of revenue
Break-even Chart:
graph that shows a company’s costs and its revenues when given a level of output
Margin of Safety:
difference between current output and break-even output
Target Profit:
a profit number that a company sets as its reach
Target Profit Output:
total output needed for a company to reach its target profit
Account:
place where all monetary movements made within the company
Final Account:
accounts or books/ what is your net economic account
Stockholders Needs:
a piece of the account that you will present to your stakeholders
Income Statements:
talk about how much you won and how much you lost
Balance Sheet:
complete look at the net wealth of the company at any given time
Window Dressing:
when you play will numbers that are in your account
Depreciation:
decrease in the value of a fixed asset over time
Managers:
they will want things about their subordinates
Workers:
want to know if they are going to get paid or not
Banks:
wants to know if the company is going to be able to pay back loans// spending money responsibly
Creditors:
ability to pay their purchase
Customers:
know what the company does to get your product
Government:
will want to know if the company will pay taxes
Investors:
the information they get will depend on how much shares you own// want to know about profitability and growth potential
Community:
not a lot of information
Ratio Analysis:
financial analysis tool used in the interpretation and assessment of a firm’s financial statements
Gross Profit Margin:
a ratio between the gross profit divided by the sales revenue
Net Profit Margin:
measure of the profit that remains after removing all costs from the sales revenue. Net profit before interest and tax divided by sales revenue
Efficiency Ratios:
ratio on how well a company uses its assets and liabilities
Return On Capital Employed (ROCE):
example of efficiency ratio
Liquidity Ratios:
ratio that shows a company’s ability to pay off its short term debt
Current Ratios:
ratio that compares a company’s current assets with their current liabilities
Acid Test Ratio:
ratio that shows how well a company is able to meet its short term obligations
Cash:
money that gets into a business through different sources (sale of its goods or services, borrowing from financial institutions, or investment by shareholders)
Cash Flow:
money that flows in and out of a business over a period of time
Cash inflows:
money that flows in
Cash outflows:
money that flows out
Net Current Assets (working capital):
money needed for the day-to-day running of a business
Cash Flow Forecasting:
predictions of a firm’s inflows and outflows over a period of time
Opening Cash Balance:
cash that the business start with at the beginning of each month
Total Cash Inflows:
total cash that goes into the business each month (particular to the specific month)
Total Cash Outflows:
total cash that goes out of the business each month (particular to the specific month)
Net Cash Flow:
difference between total cash inflows and total cash outflows
Closing Cash Balance:
estimated cash available at the end of each month
Liquidate:
sell their capital assets
Illiquid:
not having enough working capital
Stock Turnover Ratio:
ration used to measure how quickly a firm’s stock is sold and replaced over a certain period of time.
Debtor Days:
ratio used to measure the number of days that it takes, on average, for a firm to collect its debts from customers it has sold goods to on credit
Creditor Days:
ratio used to measure the number of days that it takes, on average, for a firm to pay its creditors
Gearing Ratio:
ratio used to measure the extent to which the capital from a firm comes from loan capital
Investment Appraisal:
quantitative technique used to evaluate the viability and attractiveness of an investment proposal
Payback Period:
estimated amount of the for an invest project to be able to pay back its initial cost
Average Rate of Return:
measures the annual net return on an investment
Net Present Value:
difference in the sum of present values of future cash inflow and returns and the cost of investment
