Finance

Question 1

An asset is…

Answer 1

Something a business owns

Question 2

A liability is…

Answer 2

Something a business owes

Question 3

Current liabilities are…

Answer 3

Something that must be paid back within a year

Question 4

Long-term liabilities are…

Answer 4

Something that can be repaid over a long period of time

Question 5

Current assets are…

Answer 5

Something that will be used up in a short period of time

Question 6

Fixed assets are…

Answer 6

Something that will last for a longer period of time

Question 7

A statement of comprehensive income shows…

Answer 7

How much revenue was received and how it was spent

Question 8

A debtor is…

Answer 8

Someone who owes a company money

Question 9

Turnover is…

Answer 9

The total revenue received in a given period of time

Question 10

Cost of sales is…

Answer 10

Costs involved in directly making a product

Question 11

Gross profit is…

Answer 11

Profit made before taking expenses into account

Question 12

Expenses are…

Answer 12

Other costs such as bills, machinery and advertising

Question 13

Net profit is…

Answer 13

Profit made after all expenses have been deducted

Question 14

A cash flow forecast is…

Answer 14

A prediction of how money will flow in and out of a business in a given time period

Question 15

How is net cash flow calculated?

Answer 15

Total inflows - total outflows

Question 16

How is closing balance calculated?

Answer 16

Net cash flow + opening balance

Question 17

The order of financial records is…

Answer 17

Purchase order
Delivery note
Goods received note
Invoice
Receipt 
Credit note
Statement of account

Question 18

How is revenue calculated?

Answer 18

Price per unit x units sold

Question 19

How is total variable cost calculated?

Answer 19

Cost per unit x units made

Question 20

The break even point shows…

Answer 20

How many units must be sold in order to make a profit

Question 21

How is the break even point calculated?

Answer 21

Fixed costs / (selling price per unit - variable cost per unit)

Question 22

An income statement…

Answer 22

Lists the business’ actual income and expenditure

Question 23

A statement of financial position…

Answer 23

Shows how much money invested in the business (capital) has been spent

Question 24

Short term finance is…

Answer 24

Sources of money which must be repaid within a year

Question 25

Long term finance is…

Answer 25

Sources of money which are borrowed or invested, typically for over a year

Question 26

External sources of finance include…

Answer 26

Bank loans, overdrafts, trade credit

Question 27

Internal sources of finance include…

Answer 27

Retained profit, owner funds

Question 28

Retained profit is…

Answer 28

Profit which is not shared. It is retained within the business

Question 29

A bank overdraft is where…

Answer 29

A bank lets a business ow it money when its balance goes below zero

Question 30

How is gross/net profit margin calculated?

Answer 30

(Sales revenue / gross/net profit) x 100

Question 31

How is current ratio calculated?

Answer 31

Current assets / current liabilities

Question 32

How is liquid capital ratio calculated?

Answer 32

(Current assets - inventory) / current liabilities

ALWAYS GIVE ANSWER TO 2 D.P.