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Financial Management > Exam > Flashcards

Exam Flashcards

1
Q

What is payola?

A

Giving gifts or money to facilitate radio play

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2
Q

How long does a business need to retain financial records?

A

7 years (5 for employee records)

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3
Q

What records does the business need to retain?

A 
Invoices
Receipts
Bank statements
Cash till receipts
Payslips
Interviews 
Position description
Reports
Tax returns
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4
Q

What information can be used for the basis of a personal budget?

A

What you spent last year plus inflation

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5
Q

What are the two tax rates for businesses?

A

30% for companies

Income - expenses = taxable income for sole traders and partnerships

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6
Q

What are the differences between employees and contractors?

A

Employee = super, tax, insurance, equipment, holiday leave, employer retains intellectual property, paid per hour usually

Contractor = responsible for own insurance, equipment, tax, can delegate to someone else, paid per job.

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7
Q

List all expenses for a sole trader

A

Rent, commodities (gas, water, electricity), kitchen supplies, equipment, furniture, stationery, phone, internet, postage, marketing, travel, per diems, tax, accountants, lawyers, staff, engineers, venue hire, session musicians

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8
Q

List potential income streams for a band

A

Royalties, music sales, merchandise sales, ticket sales, synchronisation

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9
Q

What role does ethics play in finance?

A

CSR (corporate responsibility)
Supply chain management
T-shirt economy

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10
Q

What does BAS stand for? How often do you need to complete one?

A

Business activity statement

Quarterly

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11
Q

Name four types of business structures

A

Sole trader
Partnership
Company
NFP

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12
Q

What is the ATO and what does it do?

A

Australian tax office, collects tax, issues tax return

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13
Q

Describe potential problems am established rock band might have if they don’t hold good financial records

A

Poor budgeting
May be audited
May be sued

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14
Q

Can a sole trader use personal assets to pay off a business? Briefly explain your answer.

A

Yes. Sole trader is not separate from the business.

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15
Q

In partnership business structure, how does the Australian government see the partners?

A

A court will usually decide that unless there is an agreement to the contrary, all partners are presumed equal

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16
Q

If the balance of intellectual property, investment and input is different amongst the band members, what contract could you use to avoid unfair situations?

A

Band agreement

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17
Q

What does pty and ltd mean? Answer separately and combined.

A

Pty = unlimited proprietary (private) company

Ltd = publicly limited company

Pty ltd = proprietary limited company, private company with at least one share holder with limited number of shares.

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18
Q

In relation to budgeting, how does the 60/20/20 break down and why?

A

60% expenses
20% savings
20% entertainment

Covers living costs, allows you to save and allows you to reward yourself so you don’t binge spend

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19
Q

Explain how you would register a business name and how much it would cost for one year.

A

ASIC

$34 for 1 year
$78 for 3 years

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20
Q

If a not for profit org makes a profit, where does the money get reinvested? Explain with brief example

A

Reinvested into next years budget.

Eg. APRA may choose to give more grants (give back to members)

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21
Q

Which business structure is best for an independent band - explain how it would function

A

Sole trader for lead songwriter or main investor with band members as employees

Or partnership (partnership agreement with percentages of share)

22
Q

Which business structure is not a legal entity of its own

A

Trust (not a business structure)

23
Q

Provide examples of good and bad debt

A

Good = Anything that appreciates in value, assets, property, shares, education

Bad = when you spend more money that what it’s worth, car loan, credit card load

24
Q

When band becomes successful or someone starts purchasing assets, what business structure should band change to?

A

Company, so they are not personally viable if something goes wrong and better for tax reasons

25
Q

Which businesses may use a trust to protect clients?

A 
Booking agent
Collection society
Financial guardian
Manager
Publisher
Record label
26
Q

If you are planing to sell your business, which structure would you change to?

A

Company, you can only sell a company

27
Q

When creating a budget what would be an appropriate contingency rate?

A

3 months income or 10-15%

28
Q

What does GST stand for and when should you register?

A

Goods and services tax

When earning $75,000+

29
Q

What percentage is GST?

A

10%

30
Q

When do you need an ABN?

A

When you begin trading, otherwise you need a hobby form

31
Q

What is tax liability equation for sole trader?

A

Income minus expenses = tax liability

32
Q

What is the tax liability for a company?

A

30%

33
Q

Which gov department website would you register an ABN

A

ABR aus business registry

34
Q

What is a shelf company?

A

When you purchase a pre made structure with pre made constitution

35
Q

What is a constitution?

A

Agreement between you and government about how your business will be run

36
Q

What is included on an invoice?

A 
Words 'tax invoice'
Business name and ABN
Name of person who it's addressed to
Date 
Brief description of goods and quantity
Amount payable with GST separate
Their business address
37
Q

What is cost plus pricing?

A

Add percentage (or margin) to the total cost of producing the product. Margin will allow you to break even, or make a profit

38
Q

What is survival pricing?

A

When companies are desperate to stay afloat. Heavy pricing discounts. People may think the products are cheap quality.

39
Q

What is market skimming (price skimming)?

A

Prices are set high to take advantage of strong demand or highly desirable products.

Eg. Concert promoters will set prices high when they know a show will sell out.

40
Q

What is market penetration? - maximum market share

A

Prices are set low to maximise sales and market share.
Products must not have premium market position.
Best suited to highly competitive markets where product quality is important but not premium

41
Q

What is Premium pricing?

A

Products have a high value or perceived value and customers are prepared to pay for highest quality.

Eg. Barbers Streisand

42
Q

What are fixed costs?

A

Cost that remain the same regardless of the number of products you sell or manufacture

Eg rent, insurance, permanent staff

43
Q

What are variable costs?

A

Vary with the level of sales or production.

Eg casual wages, manufacturing (per unit costs)

44
Q

What is the equation for determining break even points?

A

Variable cost + (fixed cost/expected sales) = unit cost

45
Q

What needs to be considered when setting up a business?

A 
The name
Business structure
Registering business with ASIC
Registering ABN
Registering for GST (if applicable)
Registering domain names
Opening separate bank account
Registering trademarks and copyright
Partnership agreement
46
Q

What is equity finance?

A

investor will invest for a for a share of the business

47
Q

What is debt finance?

A

Debt that needs to be repaid at a predetermined rate within a fixed time frame

48
Q

List 6 forms of equity finance

A 
Own funds
FF&F
Trade credit
Angel investors
Venture capitalists
Public offering
49
Q

What are angle investors?

A

Individuals with high bet worth, interested in assisting entrepreneurs

Think shark tank

50
Q

What are venture capitalists?

A

Organisations that pool funds from a number of investors. Greater than a single angel investor

51
Q

What is public offering?

A

When you list your company of the public stock exchange

Anyone can buy shares

52
Q

How do you work out how much a company will be taxed?

A

There will be a set amount

Plus, x amount of cents in every dollar over x amount

Financial Management (1 decks)

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