Finance

Question 1

Adverse Variance

Answer 1

A difference between actual and budgeted amounts which is bad e.g higher than budgeted costs

Question 2

Bank overdraft

Answer 2

Borrowings from a bank on a current account which are payable on demand

Question 3

Break even

Answer 3

The point at which the total sales of a business equal total costs - the business is making neither a profit nor a loss

Question 4

Budget

Answer 4

A detailed plan of income and expenses expected over a certain period of time

Question 5

Cash flow

Answer 5

The movements of cash into (inflows) and out of (outflows) a business

Question 6

Cash flow forecast

Answer 6

A prediction, usually by week or month, of the likely cash inflows and outflows in a business

Question 7

Contribution

Answer 7

The difference between total sales and total variable costs

Question 8

Dividend

Answer 8

A payment that is made by a company to its shareholders from the profit earned

Question 9

Exchange rates

Answer 9

The rate at which one currency can be converted into another currency

Question 10

Favourable variance

Answer 10

A difference between actual and budgeted results which is good e.g higher than budgeted revenue

Question 11

Fixed costs

Answer 11

Costs that do not vary with the level of output

Question 12

Gross profit

Answer 12

Revenue minus cost of sales

Question 13

Interest rates

Answer 13

The cost of borrowing money or the return for investing money

Question 14

Liquidity

Answer 14

The ability of a business to pay its debts

Question 15

Margin of saftey

Answer 15

The difference between the actual level of output and the break even output

Question 16

Operating profit

Answer 16

Gross profit minus admin costs

Question 17

Profitability

Answer 17

The ability of a business to generate profits from its activities

Question 18

Sales forecasting

Answer 18

The process of estimating future sales

Question 19

Total costs

Answer 19

The total variable and fixed costs in a business

Question 20

Unit cost

Answer 20

The average production cost per unit

Question 21

Variable costs

Answer 21

Costs that vary directly in proportion to output

Question 22

Variance

Answer 22

The difference between the budgeted amount and what actually happens. A variance can be positive (favourable) or negative (adverse)

Question 23

Venture capital

Answer 23

Investment made by specialist funds to finance the launch, early development or expansion of a private company

Question 24

Working capital

Answer 24

The amount of money that a business has available