A-level Business Studies Lesson 30 (3.5.2 L1)

Question 1

Budget

Answer 1

An agreed plan establishing, in numerical or financial terms, the policy to be pursued and the anticipated outcomes of that policy.

Question 2

Budgeting

Answer 2

The process involved in setting a budget.

Question 3

Variance analysis

Answer 3

The process by which the outcomes of budgets are examined and then compared with the budgeted figures. The reasons for any differences are then found.

Question 4

Favourable variance

Answer 4

When costs are lower than expected or revenue is higher than expected.

Question 5

Adverse variance

Answer 5

When costs are higher than expected or revenue is lower than expected.

Question 6

Cash flow

Answer 6

The amounts of money flowing into and out of a business over a period of time.

Question 7

Cash inflows

Answer 7

Receipts of cash, typically arising from sales of items, payments by debtors, loans received, rent charged, sale of assets and interest received.

Question 8

Cash outflows

Answer 8

Payments of cash, typically arising from the purchase of items, payments to creditors, loans, repaid or given, rental payments, purchase of assets and interest payments.

Question 9

Cash flow forecasting

Answer 9

The process of estimating the expected cash inflows and cash outflows over a period of time. Cash flow is often seasonal, so it is advisable to forecast for a period of one year.

Question 10

Net cash flow

Answer 10

The sum of cash inflows to an organisation minus the sum of cash outflows over a period of time.

Question 11

Receivables (debtors)

Answer 11

People who owe the business money, usually customers who have been given credit terms. Receivables are also known as debtors.

Question 12

Payables (creditors)

Answer 12

People who are owed money by the business, usually these are suppliers who are awaiting payment, but they may be traders who have supplied services, such as gas, electricity and telephone systems. Payables are also known as creditors.