Finance

Question 1

Name another source of finance

Answer 1

Selling assets- no interest payments

However - might have sold am asset which is needed for later use

Question 2

Name adv and disadvantage of a bank loan

Answer 2

Adv- arranged quickly, and a repayment is over a long period of time

Dis- interest and a colletaral

Question 3

What is a profit and loss account

Answer 3

The revenue subtracting the costs

Question 4

How do you work out gross profit

Answer 4

Revenue - cost of sales

Question 5

How do you work out the net profit

Answer 5

Goes profit - overheads

Question 6

What is revenue

Answer 6

Income made from selling goods or services

Question 7

What is cost of sales

Answer 7

Costs which are directly involved providing the products such as materials and wages and electricity costs

Question 8

What is overheads

Answer 8

Costs remain constant also called expenses

Question 9

What is a balance sheet

Answer 9

The assets and liabilities of a business

Question 10

Give an example of a fixed asset

Answer 10

Buildings

Question 11

Give an example of a current asset

Answer 11

Stock

Question 12

What is current liabilities

Answer 12

Bills which the firm has to pay soon

Question 13

How do you work out the net current assets

Answer 13

Current assets- current liabilities

Question 14

How do you work out gross profit margin

Answer 14

Gross profit / sales revenue x 100 (%)

Question 15

How do you work out net profit margin

Answer 15

Net profit / sales revenue x 100(%)

Question 16

How do you work out net current assets

Answer 16

Fixed assets +. Current assets - current liabilities - long term liabilities

Question 17

What is a liquidity ratio

Answer 17

Amount of cash a business has

Question 18

How do you work out the current ratio

Answer 18

Current assets / current liabilities

Question 19

How do you work out acid test ratio

Answer 19

Current assets - stock / current liabilities

Question 20

What happens if the acid test is too high ( above 1)

Answer 20

Means there’s too much cash lying about and would be more profitable to invest this money

Question 21

What happens if the acid test is much below 1?

Answer 21

It means it’s worrying and needs to do something about its costs and liabilities

Question 22

Name one source of finance

Answer 22

Retained profits: don’t have to pay interest and are arranged immediately

However - are only available in profitable businesses.