Accounting And Finance

Question 1

Accounting concepts

Answer 1

Financial -profit, levels of cash
Management - concentrates on internal financial accounts

Question 2

Sources of finance

Answer 2

Retained profit
Bank loan
Bank overdraft
Trade credit

Question 3

Break even

Answer 3

Point were costs and income are equal and is no profit or loss

Question 4

Direct costs

Answer 4

Also known as variable costs (raw materials)

Question 5

Indirect costs

Answer 5

Fixed costs

Question 6

Difference between fixed and variable costs

Answer 6

Costs don’t vary (rent) whereas variable is cost of making product (raw materials)

Question 7

Margin of safety

Answer 7

Number of units that business is over the break even point

Question 8

Budget

Answer 8

Plan of future concerning the revenues

Question 9

Variance

Answer 9

Difference between actual result and budget

Question 10

Investment appraisals

Answer 10

Analysis to consider the profitability of an investment

Question 11

Payback period

Answer 11

Time taken for project to repay its initial investment

Question 12

Net present value

Answer 12

how much investment is worth throughout lifetime, discounted to todays value

Question 13

Overhead costs

Answer 13

not directly related to the production of goods or services

Question 14

Stepped fixed cost

Answer 14

cost that doesn’t change within certain high and low thresholds of activity, will change if threshold is breached

Question 15

Average rate of return

Answer 15

average profit from investment

Question 16

Cash flow

Answer 16

measurement of amount of cash that comes into and out of business in particular period of time

Question 17

Difference between cash flow and profit

Answer 17

cash flow, flows in and out of business within a period of time. profit is what remains from your revenue after costs are deducted

Question 18

Working capital

Answer 18

money available to meet current or short term obligations

Question 19

Income statement

Answer 19

shows company revenue, expenses and profitability

Question 20

Depreciation

Answer 20

estimated reduction in value of a fixed assets

Question 21

Statement of financial position

Answer 21

used to assess the position of a business in terms of financial stability

Question 22

Liquidity ratio

Answer 22

use to work out if a company can repay creditors from the total cash they have available.

Question 23

Gross profit margin

Answer 23

what business made after paying for direct cost of doing business

Question 24

Return on equity

Answer 24

measure of company’s financial performance shows relationship between company’s profit and investor’s return

Question 25

Return on capital employed

Answer 25

financial ratio can be used to assess company’s profitability and capital efficiency

Question 26

Gearing

Answer 26

relationship or ratio of companies debt to equity