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Business chapter 20
working capital vocab
17
Business
11th Grade
04/16/2015

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Term
Working capital
Definition
Working capital - the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers. In accounting terms: making capital = current assets - current liabilities.
Term
Liquidity
Definition
the ability of a firm to be able to pay its short-term debts.
Term
Liquidation
Definition
when a firm ceases trading and its assets are sold for cash; turning assets into cash may be insisted on by courts of suppliers have not been paid.
Term
Working capital cycle
Definition
the period of time between spending cash on the production process and receiving cash payments from customers.
Term
Cash flow
Definition
the sum of cash payments to a business (inflows) less the sum of cash payments made by it (outflows).
Term
Insolvent
Definition
when a business cannot meet its short-term debts.
Term
Cash inflows
Definition
payments in cash received by a business, such as those from customers (debtors) or from the bank, e.g. receiving a loan.
Term
Cash outflows
Definition
payments in cash made by a business, such as those to suppliers and workers.
Term
Debtors
Definition
customers who have bought products on credit and will pay cash at an agreed date in future.
Term
Cash flow forecast
Definition
estimate of a firm’s future cash inflows and outflows.
Term
Opening cash balance
Definition
cash held by the business at the start of the month.
Term
Closing cash balance
Definition
cash held at the end of the month that becomes next month's opening balance
Term
Credit control
Definition
tracking and monitoring of debtors' bills to ensure that bad debt is not increased.
Term
Bad debt
Definition
unpaid customers’ bills that are now very unlikely to ever be paid.
Term
Overtrading
Definition
expanding a business rapidly without obtaining all of the necessary finance so that a cash-flow shortage develops.
Term
Investment
Definition
an asset of item that is purchased with the hope that it will generate income or appreciate in the future.
Term
Net monthly cash flow
Definition
estimated difference between monthly cash inflows and outflows
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