1.3- Putting a business idea into practice

Question 1

What are a businesses aims and objectives?

Answer 1

• Financial (Survival, profit, sales, market share, financial security)
• Non financial (Social objectives, personal satisfaction, challenge, independence, control)

Question 2

What is the formula for revenue?

Answer 2

Revenue= price *quantity

Question 3

What are examples of fixed costs?

Answer 3

• Insurance
• Tax
• Salaries

Question 4

What are variable costs?

Answer 4

• Electricity
• Materials
• Gas bills

Question 5

What is the formula for total cost?

Answer 5

Total cost= total fixed costs + total variable costs

Question 6

What is a stakeholder?

Answer 6

-Anyone who has interest in the activities of the business

Question 7

What is the formula for gross profit?

Answer 7

Gross profit= sales revenue - Cost of sales

Question 8

What is the formula for net profit?

Answer 8

Net profit= Gross profit - other operating costs

Question 9

What is the formula for interest?

Answer 9

Interest (%) = Total repayment - borrowed amount/borrowed amount

Question 10

What is the formula for break even?

Answer 10

Break even (units) = fixed costs/ 
sales price - variable

Question 11

What is the formula for margin of safety?

Answer 11

Margin of safety= actual sales - break even sales

Question 12

Why does a business need a good cash flow?

Answer 12

• To pay suppliers, overheads and employees

- To prevent business failure

Question 13

What is cash flow?

Answer 13

-Cash is the money required to cover costs

Question 14

What are examples of short-term finance?

Answer 14

• Overdraft

- Trade credit

Question 15

What are examples of long-term finance?

Answer 15

• Personal savings
• Venture capital
• Share capital
• Loans
• Retained profit
• Crowdfunding

Question 16

What are ways that a business can improve its cash flow?

Answer 16

• Arrange an overdraft
• Get trade credit from the suppliers
• Request faster payment from the customer