2.

Question 1

what is limited liability?

Answer 1

where a business owner is only liable for their initial investment should they fall into debt

LTD+PLC

Question 2

what is unlimited liability?

Answer 2

if a business falls into debt, the owner must pay even if it includes selling personal possessions

sole traders + partnerships

Question 3

what is a business plan?

Answer 3

a document which sets out the future plans for a business

Question 4

give 3 purposes of a business plan

Answer 4

1. helps obtain bank loans
2. sets business objectives
3. outlines organisation (efficiency)

Question 5

what does a cash flow forecast display?

Answer 5

where the business may have a shortfall of cash

can help arrange where short term loans are required

Question 6

what is break even?

Answer 6

the point at which total revenue = total costs

Question 7

what is contribution?

Answer 7

how much each unit produced contributes to the fixed costs

Question 8

what is the formula for break even?

Answer 8

total fixed costs/ contribution per u

Question 9

what is margin of safety?

Answer 9

the number of sales that could be lost before the business makes a loss

Question 10

what is the formula for margin of safety?

Answer 10

actual sales - break even sales

Question 11

what is a budget?

Answer 11

an estimate of income or outflow of a set period of time

Question 12

what is a variance?

Answer 12

a change to a budget

Question 13

what are the 4 purposes of a budget?

Answer 13

planning
communication
forecasting
motivation

Question 14

what is a historical budget?

Answer 14

a budget based off of current and past financial performance

Question 15

what is a zero-based budget?

Answer 15

a budget set based off of potential performance

Question 16

what is favourable variance?

Answer 16

a department has underspent, increasing profit

Question 17

what is adverse variance?

Answer 17

a department has overspent based off of a variety of reasons

Question 18

name 3 difficulties of budgets

Answer 18

1. inflexible and difficult in dynamic markets
2. can be demotivating
3. managers often increase spendature to reach the budget

Question 19

what is the formula for gross profit margin?

Answer 19

gross profit/ revenue x 100

Question 20

what is operating profit?

Answer 20

gross profit - expenses ( other costs to a business aside from stock)

Question 21

what is the formula for Net profit margin?

Answer 21

net profit/ revenue x 100

Question 22

what are the 3 types of profit?

Answer 22

gross profit
net profit
operating profit

Question 23

what is liquidity?

Answer 23

the ability of a business to turn its assetys into cash to pay liabilities

Question 24

what are the 2 ways to measure liquidity?

Answer 24

1. current ratio
2. acid test ratio

Question 25

give 3 ways on how to improve liquidity

Answer 25

1. increase long term borrowing
2. reduce stocks held
3. reduce the credit period offered to customers

Question 26

what is working capital?

Answer 26

the day to day fincances required to run a business

Question 27

give 3 internal causes of business failiure

Answer 27

1. poor efficiency
2. insufficient capital
3. poor marketing

Question 28

give 3 external causes of business failiure

Answer 28

1. changes in markets
2. shocks
3. poor planning

Question 29

what are the 4 methods of production?

Answer 29

1. job
2. batch
3. flow
4. cell

Question 30

what is cell production?

Answer 30

workers are organised into different teams responsible for different parts of the product

Question 31

what is job production?

Answer 31

high quality products are made one at a time specialised for the customer

Question 32

what is batch production?

Answer 32

goods are made in batches and can be switched out for another good on the production line

Question 33

what does productivity measure?

Answer 33

how hard an employee or machine is working

Question 34

give 2 ways productivity can be improved

Answer 34

1. productivity bonus
2. investment into new machinery

Question 35

give 2 factors which influence productivity

Answer 35

1. quality of inputs in production process
2. organisation of workers

Question 36

what is economies of scale?

Answer 36

the higher the productivity, the costs fall for each unit

allows to charge competitive pricing

Question 37

what is labour intensive production?

Answer 37

making products with mainly human efforts

Question 38

what is capital intensive production?

Answer 38

making products with mainly machinery and equipment

Question 39

what is capacity utilisation?

Answer 39

the extent to which the max capacity for output is used

Question 40

what is over-utilisation?

Answer 40

where a business cannot match the number of orders they sold

Question 41

what does low capacity utilisation lead to?

Answer 41

increase in costs due to E.O.S

Question 42

what is a current asset?

Answer 42

assets expected to be converted to cash within a year

Question 43

what is a current liability?

Answer 43

liabilities due to be payed within a year

Question 44

what is a balance sheet?

Answer 44

a fincancial statement which reports a firms assets, liabilitys and shareholder equity at a point in time

Question 45

what are the 2 types of budgets?

Answer 45

1. favourable
2. adverse