Business finance
Introduced| English | Meaning |
|---|---|
| finance/ˈfaɪnæns/ | The provision or raising of funds needed for an activity or organisation. |
| start-up capital/stɑːt ʌp ˈkæpɪtl/ | The funds needed to establish a business and begin its operations. |
| working capital/ˈwɜːkɪŋ ˈkæpɪtl/ | A top cause of business failure, even for profitable firms. |
| revenue expenditure/ˈrevənjuː ekˈspendɪtʃə/ | revenue expenditure |
| capital expenditure/ˈkæpɪtl ekˈspendɪtʃə/ | capital expenditure |
| long-term assets/lɒŋ tɜːm ˈæsets/ | long-term assets |
| current assets/ˈkʌrənt ˈæsets/ | Assets expected to be used, sold or converted into cash within the normal operating cycle or a year. |
| current liabilities/ˈkʌrənt ˌlaɪəˈbɪlɪtiz/ | Obligations expected to be settled within the normal operating cycle or a year, as defined in the accounting framework used. |
Money to start, money to grow
- You can't open a shop, buy stock or pay staff on enthusiasm alone — you need finance 融资.
- Knowing why and when a business needs money is the first step in managing it.
Sources of finance lab
Choose the best type of finance by time, risk and ownership.
Day-to-day cash for wages, suppliers and bills is called:
Difficulty 1/5 · 100 coins + a small bonus on first completion today
Working capital funds day-to-day operations.
Why businesses need finance
- Start-up capital 启动资金: premises, equipment, initial stock.
- Working capital 营运资本: day-to-day cash for wages, suppliers and bills.
- Growth: expansion, new products, takeovers.
A stock exchange: public limited companies raise finance by selling shares
Buying a new factory machine is:
Difficulty 1/5 · 100 coins + a small bonus on first completion today
Spending on a long-term asset is capital expenditure.
Paying this month's electricity bill is:
Difficulty 1/5 · 100 coins + a small bonus on first completion today
Day-to-day running costs are revenue expenditure.
Capital vs revenue expenditure 收益性支出
- Capital expenditure 资本性支出: spending on long-term assets 长期资产 (machines, buildings).
- Revenue expenditure: spending on day-to-day running (wages, materials, rent).
Worked example. Buying a delivery van is capital expenditure (a long-term asset). The fuel and the driver's wages to run it are revenue expenditure (ongoing costs).
A firm has current assets of 90 and current liabilities of 55. What is its working capital?
Difficulty 2/5 · 140 coins + a small bonus on first completion today
Working capital = 90 − 55 = 35.
A profitable business can still fail if it runs out of working capital.
Difficulty 1/5 · 100 coins + a small bonus on first completion today
Profit is not cash — too little working capital causes failure.
Working capital
- Working capital = current assets 流动资产 − current liabilities 流动负债: the cash a firm has to meet short-term needs.
- Too little working capital is a top cause of business failure, even for profitable firms.
You've got it
- finance is needed for start-up, working capital and growth
- capital expenditure buys long-term assets; revenue expenditure runs the business day-to-day
- working capital = current assets − current liabilities — vital for survival