Finance

Question 1

What is Revenue?

Answer 1

Selling price x number of units sold

Question 2

What are Variable Costs?

Answer 2

Variable cost per unit x units produced

Question 3

What are Total Costs?

Answer 3

Fixed costs + Variable costs

Question 4

What is Profit?

Answer 4

Total Revenue - Total Costs

Question 5

What is Gross Profit?

Answer 5

Revenue – Cost of Sales

Question 6

What is Net Profit?

Answer 6

Gross Profit – Total Expenses

Question 7

What is Gross Profit Margin?

Answer 7

Gross profit / Revenue X100

Question 8

What is Net Profit Margin?

Answer 8

Net profit / Revenue X 100

Question 9

What is the purpose of the finance function?

Answer 9

The finance function provides financial information, supports business planning, and aids decision making.

Question 10

How does the finance function influence business activity?

Answer 10

The finance function influences business activity by providing essential financial data for planning and decision making.

Question 11

Why do businesses need finance?

Answer 11

Businesses need finance for establishing a new business, funding expansion, running the business, recruitment, and marketing.

Question 12

What are some ways of raising finance?

Answer 12

Ways of raising finance include loans, overdrafts, trade credit, retained profit, sale of assets, owners’ capital, new partners, share issues, and crowdfunding.

Question 13

What is the importance of revenue, costs, and profit/loss in business?

Answer 13

Revenue, costs, and profit/loss are crucial for business decision-making.

Question 14

What types of costs are there in operating a business?

Answer 14

Types of costs include fixed costs, variable costs, and total costs.

Question 15

How do you calculate profit/loss?

Answer 15

Profit/loss can be calculated by subtracting total costs from total revenue.

Question 16

What are profitability ratios?

Answer 16

Profitability ratios include gross profit margin and net profit margin.

Question 17

What is the concept of break-even?

Answer 17

Break-even occurs when total costs equal total revenue.

Question 18

How is break-even quantity calculated?

Answer 18

Break-even quantity can be calculated using the formula where total costs equal total revenue.

Question 19

What is the importance of cash to a business?

Answer 19

Cash is important for providing liquidity and enabling the business to meet short-term debts and expenses.

Question 20

What is the difference between cash and profit?

Answer 20

Cash refers to liquid assets, while profit is the financial gain after expenses are deducted.

Question 21

What is cash flow forecasting?

Answer 21

Cash flow forecasting is a planning tool that anticipates periods of cash shortage and enables remedies to be put in place.