Topic 8

Word

Definition

Example

credit

an arrangement with a shop, supplier etc to buy something now and pay for it later

They are saving for new furniture - instead of buying on credit.

debit

a decrease in the amount of money in a bank account, for example when a payment is made from it

Every debit must have a corresponding credit and vice-versa.

trade credit

when a supplier allows a business customer to pay for goods or services after they are delivered, usually 30,60, or 90 days later

Half of those giving trade credit said that payment was not received on time.

invoice

a list of goods that have been supplied or work that has been done, showing how much you owe for them

Accounts invoices customers and collects the money.

bill

a list showing how much you have to pay for services or goods received

The average bill for electricity is £270 a year.

billing

preparing and sending to customers lists of amounts of money owed for goods or services

Ineffective credit control and billing procedures resulted in an unacceptable level of bad debts.

invoicing

to send someone an invoice

You will be invoiced as soon as the work is completed.

revenue

income

Most of company's revenue comes from web advertising.

letter of credit

a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time

The letter of credit required that the goods were delivered within 60 days

accounts payable

money owed by a company to its creditors

Under normal circumstances, accounts payable should show a credit balance.

accounts receivable

money owed to a company by its debtors

A review of accounts receivable indicated significant shortcomings in internal controls.

cash flow

the amount of money moving into and out of a business

Small traders often have short-term cash flow problems

costs

the amount of money that you have to pay in order to buy, do, or produce something

The distributor bears the full cost of promoting a film.

cost structure

an organization's different costs and the way they are related to each other

We have too high a cost structure, and it's obvious that we can eliminate more jobs.

economies of scale

the financial advantages of producing something in very large quantities

Large loans attract a lower interest rate than small loans because of the administrative economies of scale.

unit cost

the cost of producing one item, dealing with one customer etc

The number of people seen is high - up to 100 patients a day - thus ensuring that unit costs are kept low.

overheads

the regular and necessary costs, such as rent and heating

Many big companies have been hit by high overheads and falling sales

profit margin

the difference between the cost of producing something and the price at which you sell it

Many small companies operate on very narrow profit margins.

expenses

an amount of money that a business or organization has to spend on something

Most advertisers look upon advertising as an expense and not an investment, which is a mistake.

expenditure

Act of expending or paying out. Amount expended; expense; outlay.

Is there not a money shortage, 20% cut back in expenditure is required The Mercs and rollers are to stay, so back to shanks ponies boys.

account

an arrangement in which a bank keeps your money safe so that you can pay more in or take money out

My salary is paid into my bank account.

profit and loss account

a financial statement showing revenue, expenditure and profit from operations during a given period

Ahold's profit and loss account did not show all its losses.

P&L

a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year

I'd like to look at te previous P&L figures.

balance sheet

a statement showing the wealth of a business or organisation at a particular date

Buildings and machinery are assets that should be listed on the balance sheet.

international accounting standards

a set of internationally-agreed principlesand procedures relating to the way that companies present their accounts

The World Bank is making its loans to same companies conditional on their adoption of international accounting standards.

international standard account

accounts that follow international accounting standards

We can trust only international standard accounts.

GAAP

(generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting

All figures are based on US GAAP.

results

marks you receive after you have taken exams or tests

Students in this school get really good exam results.

interim results

are the set of figures, published outside the regular times, that show whether it has achieved a profit or a loss

The interim results of the Agency's management reform were encouraging.

audit

to check a particular part of an organization's activities or performance

When the cars it builds in Canada were audited, they were accepted as having the 50% North American content required under trade rules.

auditor

someone whose job is to officially examine a company's financial records

I suggested to the state's attorney that we use an independent auditor, but he insisted on a departmental audit.

bottom line

the last line on a financial document which shows the final result (total profit once all costs have been deducted)

Falling sales are going to have a negative impact on the bottom line,

asset

a useful or valuable thing or person

The airport is a great asset to the region.

liability

the state of being legally responsible for something

The partners accept unlimited liability for any risks they undertake.

tangible asset

an asset that is physical and can be valued easily, rather than an intangible asset that is difficult to value

Investors fled financial markets, putting their money into gold, collectibles and other tangible assets.

intangible asset

something that a business has and can make money from, but that is not something physical and so cannot easily be valued, for example a name of a product, technical knowledge, loyalty from customers e

Intangible assets such as information, image, and people are the main drivers of business today.

current asset

money that a business has or is owed, or something that could easily be turned into money, for example rawmaterials and goods that have been produced but not sold

Investment properties are now shown as current assets.

fixed asset

something that a business owns and that it uses in order to produce goods, for example a piece of land, a building, or a piece of machinery

Virtually all of their money is tied up in fixed assets.

interest

an amount paid by a borrower to a lender, for example to a bank by someone borrowing money for a loan or by a bank to a depositor

Any spare cash is best put in a savings account where it will earn interest.

borrow

to get or receive something from someone with the intention of giving it back after a period of time

Can I borrow some money, please?

lend

to let someone borrow money from you or use something that you own, which they will give back to you later

Can you lend me $20 till Friday?

loan

money borrowed from a bank, financial institution, person etc on which interest is usually paid to the lenderuntil the loan is repaid

The bank recently made a loan to the company for a new warehouse.

principal

the original amount of a loan, not including any of the interest that is paid

No principal is due for repayment until next year.

debt

a sum of money that is owed or due

He managed to pay off his debts in two years

in debt

owing money

Ron and Melanie found themselves out of work and deep in debt.

out of debt

If you are out of debt or get out of debt, you succeed in paying all the money that you owe

How can I accumulate enough cash to get out of debt?

debtor

someone who owes money

Debtors must repay part of their debt each month.

creditor

a person or company to whom money is owing

He sold his Ferraris to pay off his creditors.

all-cash deal

a financial transaction in which the payment is made entirely in money

Sareholders are entitled to demand a proper all-cash deal.

equity

the quality of being fair and impartial

He owns 62% of the group's equity.

financing

the money provided for an investment, and the arrangements for providing it

He said he hadn't carefully considered the project's financing.

management buyout

the purchase of a controlling share in a company by its executive directors and/or managers

Founders to stay on after Bailey Fisher management buyout.

raise

to increase an amount, number, or level

We can cut the state budget or raise taxes.

rights issue

an occasion when a company makes new shares available to existing shareholders. The new shares are usually cheaper than the current value of the existing shares

The company plans to raise $322 million through a 1-for-5 rights issue.

flotation

making shares in a company available for people to buy for the first time

The group has decided to postpone its stockmarket flotation until next year.

share flotation

is the process of converting a private company into a public company by issuing shares available for the public

A share flotations which aims to raise 32 million dollars.

takeover

an act of assuming control of something, especially the buying out of one company by another

The bank fought off a takeover by another bank recently.

takeover bid

a type of corporate action in which a company makes an offer to purchase another corporation

A hostile takeover bid for America's Fifth-biggerst computer-maker.

venture capital

capital invested in a project in which there is a substantial element of risk, typically a new or expanding business.

His startup raised venture capital.

working capital

money used by a business to carry on production and keep trading, for example to pay employees and suppliersbefore money is received for goods sold

We will have to make our entire technical staff redundant because we have run out of working capital.

liquidity

the state of having enough money or assets to pay any money that is owed

The business no longer has sufficient liquidity to meet its operational needs