Finance

Question 1

Why is a break-even chart crucial to an organisation

Answer 1

It shows how many units must be sold before the company stops making a loss and begins to make profit

Question 2

What is the break even point

Answer 2

The point on the chart where the company does not make a loss or a profit

Question 3

What is a fixed cost

Answer 3

Costs which remain constant even when the volume of production changes these must be paid even if no sales are made

example rent and insurance

Question 4

What is variable costs

Answer 4

Costs which vary directly with the volume of production

example raw materials and wages

Question 5

What is sales revenue

Answer 5

The total money a business has made from that sales, this will increase as more products are produced

Question 6

What is the breakeven point in terms of total costs and sales revenue

Answer 6

This is reached when total costs equals sales revenue. At this point neither loss nor profit is being made

Question 7

Benefits of using breakeven

Answer 7

• Shows information about costs and revenue visually
• shows the number of units that need to be sold in order to break even
• shows the profit or loss that will be made to different sales levels
• compare costs with revenue at different sales levels
• shows breakdown fixed and variable costs

Question 8

What is the importance of cash budgets

Answer 8

• New businesses aim to simply cover costs in the initial period of their business
• they need to forecast their costs and income in advance
• they need to be able to calculate if they can cover the costs and if not, what to do about it
• it allows for greater control of the business
• less uncertainty and fear about the future
• provides targets for staff to work towards

Question 9

Problems and solution with cash budgets

Answer 9

• Decreased cash sales — increase sales (promotions/price)

Question 10

What is a cash budget

Answer 10

A forecast of the money expected to be received and the money expected to be paid out over a period of time

Question 11

What is an income statement

Answer 11

Statement that shows how much profit the business has made over a period of time

Question 12

What is the trading profit

Answer 12

Gross profit = sales - less cost of sales

Question 13

Problems and solutions with income statements

Answer 13

• Decrease in sales — increase selling price

* increase in expenses — reduce expenses through better deals

Question 14

Why are use a spreadsheet to create financial statements

Answer 14

• Once the formulas entered calculations are done automatically
• spreadsheet can be saved and edited later
• when figures are altered totals will be updated automatically

Question 15

The equality act and examples

Answer 15

To you protects people from discrimination in employment

age
disability
race
sex

Question 16

Health and safety at work act

Answer 16

Make sure employers and employees are safe when working

• employers must provide relevant health and safety training to employees
• provide a necessary equipment and clothing to employees
• employees must report any hazards or accidents that happen
• comply with training given by employer