AP®︎ Business with Personal Finance: Topic 3.5 Flashcards
Master key terms and definitions for Topic 3.5 of AP Business with Personal Finance – Financial Capital to help you prep for quizzes and the AP exam.
Financial Capital
Money provided to a business to acquire resources, operate, or grow; unlike revenue, it is not earned from sales
Money provided to a business to acquire resources, operate, or grow; unlike revenue, it is not earned from sales
Funding a business with the entrepreneur’s personal savings or other personal resources
The point at which revenue for a period equals all costs for that period, producing neither profit nor loss
The amount each unit contributes toward fixed costs and profit: selling price per unit − variable cost per unit
The units needed to break even: fixed costs ÷ (selling price per unit − variable cost per unit), rounded up to a whole unit
Capital obtained through loans or bonds that must be repaid with interest but does not give the lender ownership
The original amount borrowed, which the borrower must repay
The cost of borrowing to the business and income received by the lender
Raising capital by selling ownership shares, giving investors a claim on future value and profits and possibly some control
New businesses typically operate for under two years and often use personal, friends-and-family, or equity funding; established businesses typically have at least two years of proven performance and better access to bank loans
A financial asset representing a loan from an investor to a corporation, which pays interest to the bondholder
An ownership share in a corporation that may be sold privately or publicly; its holder is an investor and shareholder
A loan, bond, or ownership share held because it may produce income or be resold
A market where current owners sell existing financial assets to other buyers, usually without providing new capital to the business
A distribution of a corporation’s profits to shareholders; it is not guaranteed because earnings may be reinvested
The gain from selling an asset for more than its purchase price: selling price − purchase price
The yearly gain relative to the original asset price: (income + capital gain) ÷ purchase price × 100%.
A borrower’s failure to make required interest or principal payments
A person’s or institution’s willingness to accept financial risk
An evidence-based estimate of a business’s economic value, used to assess ownership shares and repayment capacity
A polished, concise presentation that uses evidence from a business plan to persuade lenders or investors to meet a specific funding request
Evidence that a defined market wants a product enough to support viable sales
