Theme 2 Keywords
Cash Flow & Finance Terms
Cash Flow Forecasts – A prediction of money coming in and going out of a business.
o Example: A small shop estimates sales and expenses for the next three
months.
Improving Cash Flows – Ways businesses increase cash availability.
o Example: Offering discounts for early payments.
Internal Finance – Money raised from inside the business.
o Example: Using retained profits instead of taking a loan.
External Finance – Money obtained from outside sources.
o Example: A startup gets funding from investors.
Retained Profit – Profit kept in the business for reinvestment.
o Example: A bakery saves £5,000 of its yearly profit to buy a new oven.
Share Capital – Money raised by selling shares in a business.
o Example: A tech company sells shares to investors to fund expansion.
Overdraft – A short-term loan allowing a business to withdraw more than its balance.
o Example: A café uses an overdraft to cover stock costs before payday.
Venture Capital – Investment from firms or individuals in high-risk businesses.
o Example: A new app receives funding from a venture capitalist in exchange
for equity.
Trade Credit – Buying goods/services and paying later.
o Example: A retailer orders stock but pays suppliers 30 days later.
Bank Loan – A fixed sum borrowed from a bank, repaid with interest.
o Example: A business borrows £50,000 to open a new store.
Leasing – Renting equipment instead of buying.
o Example: A construction company leases cranes rather than buying them.
Grants – Government or organisations providing money without repayment.
o Example: A startup gets a £10,000 grant for using eco-friendly materials.
Peer-to-Peer Funding – Borrowing from individuals online instead of banks.
o Example: A new coffee shop raises money through crowdfunding.
Sale of Assets – Selling business items for cash.
o Example: A hotel sells unused furniture to raise funds.
Owners’ Capital – Money invested by the business owner.
o Example: A florist uses £20,000 of personal savings to start the business.
Break-even Analysis & Costs
Break-even – The point where total revenue equals total costs, meaning no profit or
loss.
o Example: A bakery must sell 500 cakes per month to cover all expenses.
Fixed Costs – Costs that do not change with output.
o Example: Rent, insurance, salaries.
Variable Costs – Costs that change with output.
o Example: Raw materials, packaging, electricity.
Contribution – The money left after variable costs are paid, used to cover fixed costs.
o Example: Selling price (£10) – variable cost (£4) = £6 contribution per item.
Margin of Safety – The amount of sales above the break-even point.
o Example: A bakery sells 600 cakes but only needs 500 to break even.
Cash Flow & Finance Terms
Cash Flow Forecasts – A prediction of money coming in and going out of a business.
o Example: A small shop estimates sales and expenses for the next three
months.
Improving Cash Flows – Ways businesses increase cash availability.
o Example: Offering discounts for early payments.
Internal Finance – Money raised from inside the business.
o Example: Using retained profits instead of taking a loan.
External Finance – Money obtained from outside sources.
o Example: A startup gets funding from investors.
Retained Profit – Profit kept in the business for reinvestment.
o Example: A bakery saves £5,000 of its yearly profit to buy a new oven.
Share Capital – Money raised by selling shares in a business.
o Example: A tech company sells shares to investors to fund expansion.
Overdraft – A short-term loan allowing a business to withdraw more than its balance.
o Example: A café uses an overdraft to cover stock costs before payday.
Venture Capital – Investment from firms or individuals in high-risk businesses.
o Example: A new app receives funding from a venture capitalist in exchange
for equity.
Trade Credit – Buying goods/services and paying later.
o Example: A retailer orders stock but pays suppliers 30 days later.
Bank Loan – A fixed sum borrowed from a bank, repaid with interest.
o Example: A business borrows £50,000 to open a new store.
Leasing – Renting equipment instead of buying.
o Example: A construction company leases cranes rather than buying them.
Grants – Government or organisations providing money without repayment.
o Example: A startup gets a £10,000 grant for using eco-friendly materials.
Peer-to-Peer Funding – Borrowing from individuals online instead of banks.
o Example: A new coffee shop raises money through crowdfunding.
Sale of Assets – Selling business items for cash.
o Example: A hotel sells unused furniture to raise funds.
Owners’ Capital – Money invested by the business owner.
o Example: A florist uses £20,000 of personal savings to start the business.
Break-even Analysis & Costs
Break-even – The point where total revenue equals total costs, meaning no profit or
loss.
o Example: A bakery must sell 500 cakes per month to cover all expenses.
Fixed Costs – Costs that do not change with output.
o Example: Rent, insurance, salaries.
Variable Costs – Costs that change with output.
o Example: Raw materials, packaging, electricity.
Contribution – The money left after variable costs are paid, used to cover fixed costs.
o Example: Selling price (£10) – variable cost (£4) = £6 contribution per item.
Margin of Safety – The amount of sales above the break-even point.
o Example: A bakery sells 600 cakes but only needs 500 to break even.
