HSC Business Studies - Finance Exam
Questions With Verified Answers
accounts payable
the money a business owes to its suppliers and service providers. Also known as creditors or trade
creditors
accounts receivable
a current asset that represents money owed to the business in short term. Money is owed to the
business by customers who are yet to pay for products they have already received. Also known as
debtors.
accounts receivable turnover ratio
ratio measures how long, on average, account customers take to pay the invoices sent to them by the
business. It indicates how promptly customers who have been given credit, take to pay for products
they have bought.
amortisation
depreciation of intangible assets over time. Also = repayment of debt by a series of instalments
audit
an independent check of the financial records of a business by a certified accountant. Can also be
performed internally by managers
balance Sheet
snapshot on a particular day (usually last day of the financial year) that shows the assets, liabilities
and equity of the business. Gives an indication of the financial stability of a business. A=L+E
benchmarking
process of measuring performance against established standards, such as a comparison of a firm's
performance against standards set by competitors in same industry in domestic market
budget
Tool to evaluate the performance of a business by comparing actual results with planned results.
Usually drawn up as a spreadsheet illustrating the changes in data over time.
capitalised expenses
the costs incurred when financing a non-current asset and added to the cost of the asset
cash-flow management
management of cash flowing into business as revenue and cash outflow when expenses are paid by a
business --> ensures that the business maintains its liquidity
cash-flow statement
a financial report illustrating the movement of cash into and out of a business over time
, cost centres
the expenses associated with each key business function providing a product to consumers
credit policy
conditions under which a business is willing to allow other businesses to postpone their payments for
products they have bought from it; how many days are permitted to pass before payment is due
credit rating
assessment of a business's ability to repay loans based on its past financial performance and
repayment of past loans. Ratings are usually expressed as letter grades
creditors
the businesses, financial institutions and individuals to which a business owes money. (accounts
payable)
current assets
assets (e.g. cash in bank, accounts receivable) that earn revenue for business in the short term -->
usually fewer than 12 months
current ratio
(also working capital ratio) measures a business's ability to pay its current liabilities from its current
assets --> liquidity. Should be 2:1 or greater and expressed as percentage. Too much cash means it is
not being invested, reducing profit
debentures
type of long-term debt finance that a business can get by offering a prospectus to the general public
of securities exchange. Business offers an investment opportunity to people who want a good return
on risky investment.
debtors
business or individuals that owe money to a business (accounts receivable)
depreciation
(of assets) occurs where assets (e.g. motor vehicles, equipment) lose their value over time due to
wear and tear and new tech. developments.
deregulation
government's removal or reduction in controls and regulations on an industry or sector of the
economy or market in order to achieve greater competition.
derivative
special contract between global businesses. It is a type of hedging and is used to reduce financial risks,
e.g. those created by appreciation and depreciation of currencies
dividend
Questions With Verified Answers
accounts payable
the money a business owes to its suppliers and service providers. Also known as creditors or trade
creditors
accounts receivable
a current asset that represents money owed to the business in short term. Money is owed to the
business by customers who are yet to pay for products they have already received. Also known as
debtors.
accounts receivable turnover ratio
ratio measures how long, on average, account customers take to pay the invoices sent to them by the
business. It indicates how promptly customers who have been given credit, take to pay for products
they have bought.
amortisation
depreciation of intangible assets over time. Also = repayment of debt by a series of instalments
audit
an independent check of the financial records of a business by a certified accountant. Can also be
performed internally by managers
balance Sheet
snapshot on a particular day (usually last day of the financial year) that shows the assets, liabilities
and equity of the business. Gives an indication of the financial stability of a business. A=L+E
benchmarking
process of measuring performance against established standards, such as a comparison of a firm's
performance against standards set by competitors in same industry in domestic market
budget
Tool to evaluate the performance of a business by comparing actual results with planned results.
Usually drawn up as a spreadsheet illustrating the changes in data over time.
capitalised expenses
the costs incurred when financing a non-current asset and added to the cost of the asset
cash-flow management
management of cash flowing into business as revenue and cash outflow when expenses are paid by a
business --> ensures that the business maintains its liquidity
cash-flow statement
a financial report illustrating the movement of cash into and out of a business over time
, cost centres
the expenses associated with each key business function providing a product to consumers
credit policy
conditions under which a business is willing to allow other businesses to postpone their payments for
products they have bought from it; how many days are permitted to pass before payment is due
credit rating
assessment of a business's ability to repay loans based on its past financial performance and
repayment of past loans. Ratings are usually expressed as letter grades
creditors
the businesses, financial institutions and individuals to which a business owes money. (accounts
payable)
current assets
assets (e.g. cash in bank, accounts receivable) that earn revenue for business in the short term -->
usually fewer than 12 months
current ratio
(also working capital ratio) measures a business's ability to pay its current liabilities from its current
assets --> liquidity. Should be 2:1 or greater and expressed as percentage. Too much cash means it is
not being invested, reducing profit
debentures
type of long-term debt finance that a business can get by offering a prospectus to the general public
of securities exchange. Business offers an investment opportunity to people who want a good return
on risky investment.
debtors
business or individuals that owe money to a business (accounts receivable)
depreciation
(of assets) occurs where assets (e.g. motor vehicles, equipment) lose their value over time due to
wear and tear and new tech. developments.
deregulation
government's removal or reduction in controls and regulations on an industry or sector of the
economy or market in order to achieve greater competition.
derivative
special contract between global businesses. It is a type of hedging and is used to reduce financial risks,
e.g. those created by appreciation and depreciation of currencies
dividend
