5.1 Business Finance Flashcards

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Asset

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is any item owned by a business that can

generate an income for the enterprise.

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Capital

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is the money invested into a business either by its owners or by organisations such as banks.

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Non-current assets

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are assets that a business expects to

hold for one year or more.

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Short-term sources of finance

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are needed for a limited

period of time, normally less than one year.

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Long-term sources of finance

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are those that are needed over a longer period of time, usually over a year.

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Insolvency

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exists when a business’ debts (or liabilities)

exceed the assets available to pay them.

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Liabilities

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refers to the money owed by a business to

individuals, suppliers, banks and others.

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Bankruptcy

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occurs when an individual, a sole trader or a

partnership is judged unable to pay its debts by a court of law.

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Liquidation

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is the dissolution of a company by selling its

assets to settle its liabilities.

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Administration

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is a process available to a company to

protect itself while it attempts to pay its debts and to escape insolvency.