5. Finance

Question 1

Financial objectives

Answer 1

ROI
Capital structure
Revenue
Costs
Profit
Cash flow

Question 2

Cash flow forecast

Answer 2

Opening balance
Closing balance
Net cash flow

Question 3

Types of profit

Answer 3

Gross profit
Operating profit
Profit for the year

Question 4

Contribution per unit

Answer 4

Difference between selling price per unit and variable cost per unit

Question 5

Total contribution

Answer 5

Difference between sales revenue and variable costs

Question 6

Break-even

Answer 6

Business is not making profit or loss

Question 7

GPM
OPM
Profit for the year margin

Answer 7

Measure firm’s profitability

Question 8

Timings of cash flow

Answer 8

Increase Inflows - receivables
Reduce outflows - payables

Question 9

Improve cash flow and profitability

Answer 9

Sale of assets
Sale and leaseback
Delaying payment to suppliers
Reduce overhead spending

Question 10

ROI(%)

Answer 10

Operating profit / capital invested X 100

Question 11

Gearing

Answer 11

Debt / long term funding X 100

Question 12

Profit

Answer 12

Revenue - total costs

Question 13

Gross profit

Answer 13

Sales revenue - cost of sales

Question 14

Operating profit

Answer 14

Gross profit - expenses

Question 15

Profit for the year

Answer 15

Operating profit - tax and interest

Question 16

Net cash flow

Answer 16

Inflows - outflows

Question 17

Closing balance

Answer 17

Opening balance + net cash flow

Question 18

Break-even

Answer 18

Revenue = costs

Question 19

Break-even point

Answer 19

Fixed cost / contribution per unit

Question 20

Contribution

Answer 20

Selling price - variable cost

Question 21

Margin of safety

Answer 21

Actual level of output - break even level of output

Question 22

Gross profit margin

Answer 22

Gross profit / sales revenue X 100

Question 23

Operating profit margin

Answer 23

Operating profit / sales revenue X 100

Question 24

Profit for the year margin

Answer 24

Profit for the year / sales revenue X 100