Finance definitions

Accounting costs. When costs are expressed in terms of resources.
Accounting. The collecting, recording, compiling and forecasting of financial information.
Adverse variance. When the variance between actual and budgeted figures results in lower profit.
Auditing. A check by an independent company that accounts are being kept accurately and up to date.
Balance sheet. A statement of the organisation's assets and liabilities at a precise point in time.
Bankruptcy. When an individual is unable to pay its liabilities, debts and payments.
Base rate. The interest rate set by the Bank of England which high street banks use to set their rates.
Breakeven point. When the company's total costs equal its total revenue; therefore it is no longer making a loss.
Contribution. The measure of the amount each department or product contributes to fixed costs. It is calculated by taking variable costs from total revenue.
Core business. The major activity the business takes part in.
Credit control. The management of the company's debtors which includes vetting potential customers for credit worthiness, following up late payments and pursuing bad debts.
Creditors. Individuals or other businesses that are owed money by the business.
Culture. The code that effects a business' attitudes, decision making, and management of its staff.
Debtors. People or companies that owe the business money.
Delegate. Passing authority down the hierarchy.
Economies of scale. Factors that cause lower costs when buying in bulk.
EDI. Electronic data interchange. Communication between computers used in a retail branch to transmit information about the day's sales to a central computer to be analysed and replacement supplies be ordered etc.
Entrepreneur. A person who enjoys starting a new business and is willing to take risks.
Favourable variance. When the variance between actual and budgeted figures results in higher profits.
Financial accounting. Gathering and publishing information to do with the finances of a company.
Fixed costs. Costs which don't vary with output e.g. rent.
Insolvency. Occurs when a company's external liabilities are greater than its assets.
Loan guarantee scheme. Government backed loan insurance scheme that guarantees up to 80% of the money needed to start a new business.
LTD. Limited company - shares not available through the stock market.
Management accounting. Accounting statements that are produced to assist the company's marketing. Management accounts can be used for planning, decision making, review and control.
Margin of safety. The amount by which demand can fall before the company begins to make a loss.
Monopoly. A single product for a whole market.
One off profit. A surplus of money which is a result of an event which is unlikely to occur again in the future.
Opportunity costs. Measures the cost of the next best thing that a company has missed out on by choosing an alternative. It may or may not be measured in terms of money (Think of it as the opportunity cost of spending a night studying is going out to the cinema).
Overtrading. Occurs when a firm expands without the necessary long term finance so puts too great a strain on working capital.
PLC. Public limited company - shares are available to the public on the stock market.
Profit margin. A proportion of sales revenue which can be expressed as a total or on a per unit basis.
Security. Also known as collateral which is a means of making a loan secure by the borrower putting up land or property as a guarantee against failure to pay back loan.
Stock exchange. The market for trading securities (stocks and shares).
Variable costs. Costs which vary with output e.g. raw materials.
Venture capital. This is used for a medium sized business when they need extra capital but are unable or unwilling to float on the stock market.
Working capital. The day to day finance needed for running a business.
Zero budgeting. Setting budgets to zero each year and expecting budget holders to justify why they need the money in their budget.