3.Finace

Question 1

Administration expenses

Answer 1

Operating costs and expenses that are not directly related to producing goods or services. It’s usually distribution costs. 

Question 2

Profit of the year

Answer 2

Amount of profit that is left after the tax has been accounted for

Question 3

Profit objective

Answer 3

Profit maximisation
Exceed profit margins for the market

Question 4

Cash flow objectives

Answer 4

Minimise interest cost
Reduce amount held in inventories
Reduce borrowings to target level

Question 5

Equity

Answer 5

Amount invested by the owners of the business, such as share, capital and retain profits

Question 6

Debt

Answer 6

Finance provided to the business by external party, such as bank, loans, and other long-term debt

Question 7

Influences on financial objectives

Answer 7

Business owners
Competitors
Economic conditions
Sides and status of the business
Social and political change

Question 8

Financial objective

Answer 8

Specific goal, target of relating to a financial performance resources and structure of business

Question 9

Budget

Answer 9

Financial plan for the future concerning the revenues and costs of the business

Question 10

Historical budgeting

Answer 10

Using previous figures such as last years

Question 11

Zero budgeting

Answer 11

Budgeted costs and revenues I said zero

Question 12

Main types of budget

Answer 12

Revenue
Cost
Profit

Question 13

Variance analysis

Answer 13

Calculating investigating the differences between actual results and the budget

Question 14

Favourable variances

Answer 14

Actual figures are better than the budget figure

Question 15

Adverse variances

Answer 15

Actual figure is worse than the budget figure

Question 16

Cause of favourable variance

Answer 16

Stronger, market demand
Selling prices in increase
Competitive weakness
Better productivity/efficiency

Question 17

Limitations of budgets

Answer 17

Only as good as the data being used
Lead to flexibility in decision-making
May take time to complete manage
Result in short-term decisions to keep them in the budget

Question 18

Incremental budgeting

Answer 18

A new budget is formed for making minor changes from the current budget

Question 19

Contribution

Answer 19

Per unit, when variable cost per unit is taken away from selling price per unit

Question 20

Advantages of breakeven analysis

Answer 20

Focuses on what output is required for a business, which probability
Calculations are quick and easy

Illustrates importance of keeping fest cost down to a minimum

Question 21

Disadvantages of breakeven analysis

Answer 21

On will take assumptions, where products are not sold at the same price at different levels of output

Sales are unlikely to be the same as output

Most businesses sell more than one product

And it’s more of a planning aid rather than a decision, making tool

Question 22

Why to produce a cash flow forecast?

Answer 22

Advanced warning of cash, shortages

Provide reassurance to investors and leaders

Make sure the business can afford to pay supplies and employees

Question 23

Cash flow problem

Answer 23

When the business does not have enough cash to be able to pay its liabilities

Question 24

Common problems with cash flow forecast

Answer 24

Sales proof love and expected

Customers do not pay up on time

Costs proof higher than expected

Question 25

What would happen to much spending on fixed assets

Answer 25

Spending too much on fixed assets made worse of short-term finances used fixed assets are hard to turn back into cash in the short term

Question 26

What happens if there’s too much in inventory

Answer 26

Access stock up cash
Increased that stocks become obsolete
But there needs to be enough stock to meet demand
Bulk buying may mean lower price

Question 27

Overtrading

Answer 27

Why business expands too quickly putting pressure on short-term finances such as keen to open new outlets. Have to pay rent in advance pay for shop fitting pay for stocks.

Question 28

Debtors

Answer 28

Amount owed by customers

Question 29

Creditors

Answer 29

Amounts owed to suppliers

Question 30

Debt, factoring

Answer 30

The selling of debtors to a third-party
This generates cash, which guarantees the firm, a percentage of money owed to it, but will produce income. Profit margin made on sales.
Costs involved in factoring can be high

Question 31

Credit control?

Answer 31

Establishing credit limits for new customers
Chasing up debts
Monitoring the age of debts
Setting realistic limits

Question 32

Improving cash position in short term

Answer 32

Reduce current assets
Increase current liabilities
Sell, surplus, fixed assets

Question 33

Improve cash position long-term

Answer 33

Increase equity finance
Increase long-term liabilities
Reduce net outflow on fixed assets

Question 34

Short term finance

Answer 34

Overdraft
Trade credit
Factoring

Question 35

Long-term finance

Answer 35

Share capital
Retain profits
Venture capital
Mortgages
Long-term bank loans

Question 36

Medium term finance

Answer 36

Bank loan
Leasing
Hire precious
Government grant

Question 37

Debenture

Answer 37

Form of bond, or long-term loan, which is issued by the company, usually with a fixed rate of interest
Usually secured against the assets of the company, which can be traded

Question 38

Ratio analysis

Answer 38

Analysing relationships between financial data to assess the performance of a business

Question 39

What does gross profit margin show?

Answer 39

The profit business makes on its sales minus cost of good
Percentage of gross profit made on sales
Help a business, decide whether it needs to race price or reduce the cost

Question 40

How does operating/net profit margin tell us

Answer 40

How effectively a business turn sales into profit
How efficiently businesses run
Where business is able to add value?