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What is finance?
Money that is available to a business.
What are the two main types of business expenditure?
Capital expenditure and current expenditure.
What is capital expenditure?
One-off or long-term spending
What is current expenditure
Day-to-day running costs
Give ONE example of capital expenditure.
Buying land / machinery / a building / delivery van.
Give ONE example of current expenditure.
Wages / internet / electricity / cleaning supplies.
What principle states finance should match the time period of the need?
The matching principle.
How long are short-term sources of finance repaid within?
Within one year.
Give ONE example of a short-term source of finance.
Bank overdraft / trade creditors / accruals.
What is a bank overdraft?
Permission to withdraw more money than is in the bank account.
What is trade credit?
Buying goods now and paying later.
What are accruals (expenses due)?
Expenses that do not need to be paid immediately.
How long are medium-term sources repaid within?
1-5 years
Give ONE example of medium-term finance.
Term loan / leasing / hire purchase.
What is leasing?
Renting an asset instead of buying it.
What is hire purchase?
Paying for an asset in instalments while using it immediately.
