Finance

Question 1

Name a short-term source of finance

Answer 1

Over draft, Trade Credit, Factoring

Question 2

What is the formula for revenue?

Answer 2

Revenue= Quantity Sold x Selling Price
Revenue= Quantity x Price

Question 3

What is Insolvency?

Answer 3

If a business runs out of cash and can not pay its suppliers or workers it is insolvent.

Question 4

Name 2 types of variable costs

Answer 4

Raw Materials, Packaging, Fuel, Employee Wages

Question 5

What are Indirect costs?

Answer 5

Indirect costs have no connection with the product made.

Question 6

At what point is a business not making a profit or a loss?

Answer 6

The Break-Even Point

Question 7

Why does a business need finance?

Answer 7

A business needs finance to start-up, to run the business and to expand the business.

Question 8

Name 4 examples of long-term sources of finance

Answer 8

Bank Loans, Debentures, Mortgage, Owners Savings, Hire Purchase

Question 9

What is a debenture?

Answer 9

It is a loan that is repayable on a fixed date and has a fixed amount of interest to be repaid.

Question 10

What do lenders ask for?

Answer 10

Lenders ask for collateral as a guarantee that a loan is repaid.

Question 11

What is the formula to work out total costs?

Answer 11

Variable Costs+ Fixed Costs= total Costs

Question 12

Name 3 Internal sources of finance?

Answer 12

Sales of Assets, Retained Profits from previous years, Family and Friends

Question 13

What is the formula for the break-even point?

Answer 13

(Selling Price- Variable Costs per Unit/ Selling Price)

Question 14

What is an external source of finance?

Answer 14

External sources of finance are finances that are found outside of the business.

Question 15

Name 3 External sources of finance?

Answer 15

Bank Loan, Overdraft, Government or Charitable Grants

Question 16

What is a fixed cost?

Answer 16

A fixed cost is a cost that never changes.

Question 17

What is the formula for profit?

Answer 17

Total Revenue- Total Cost= Total Profit

Question 18

What is expenditure?

Answer 18

Money spent on buying stock is expenditure.

Question 19

What are costs?

Answer 19

Costs are expenses paid out to run the business.

Question 20

What is the formula for net cash flow?

Answer 20

Receipts- Total Payments= Net Cash Flow

Question 21

What is the key action needed to make a business survive?

Answer 21

A business must make a profit.

Question 22

What is hire purchase?

Answer 22

Hire purchase is where an item is hired and rented but never owned.

Question 23

What is an internal loan?

Answer 23

A loan that is received from family or friends

Question 24

What is an external loan?

Answer 24

A loan that is received from a bank or venture capitalist.

Question 25

what is a cash flow forecast?

Answer 25

a cash flow forecast is a prediction that may happen in the future for the inflows and outflows of a business.

Question 26

How can cash flow be improved?

Answer 26

Improve Planning, Better Market Research, Improve Decision Making

Question 27

What are short-term sources of finance?

Answer 27

Short-term sources of finance are types of finance that last for less than a year.

Question 28

What is a creditor?

Answer 28

A creditor lends funds to a business.

Question 29

What are indirect costs?

Answer 29

Indirect costs have no direct connection with a product.

Question 30

FC + VC = ?

Answer 30

TC

Question 31

What are the benefits of making a profit within a business?

Answer 31

Business owners are able to invest in business expansion, save for future losses or downfalls and increase wages for personal benefits.

Question 32

What is the point of a break-even chart?

Answer 32

A break-even chart establishes a point where the business is making a profit rather than a lost. It plans ahead and shows levels of production it needs to be profitable.

Question 33

When is a business solvent?

Answer 33

A business is solvent when it is able to meet short-term debts when they are due to be repaid.

Question 34

Why does a business need adequate working capital?

Answer 34

To pay staff wages, To pay off debts, To pay business costs and bills.

Question 35

What is the formula for closing balance?

Answer 35

Net Cash Flow + Opening Balance = Closing Balance

Question 36

Direct Costs + Indirect Costs =

Answer 36

Total Costs

Question 37

How do business earn most of their revenue/Income?

Answer 37

Businesses earn most of their income from selling their products to customers. They then receive revenue.

Question 38

Closing balance - net cash flow =

Answer 38

Opening Balance

Question 39

Name 3 examples of Fixed costs

Answer 39

Rent, Management Salaries, Insurance, Advertising

Question 40

As output changes variable costs...

Answer 40

CHANGE

Question 41

As output changes fixed costs...

Answer 41

DO NOT CHANGE

Question 42

What is a long-term source of finance?

Answer 42

A source of finance that is repaid over a long period of time.

Question 43

What is a balance sheet?

Answer 43

It is a sheet created to see if a business can afford to pay back debts with assets. It records where the business got its money from and what it spent it on.

Question 44

Name 4 examples of current assets

Answer 44

Debtors, Value of Stock, Computer Peripherals, Short-term Investments

Question 45

Name 4 examples of Non-current/ Fixed assets?

Answer 45

Fixtures and Fitting, Heating and Lighting, Machinery and Long-term Investments

Question 46

What are current liabilities?

Answer 46

Money that the business owes owes.