finance

Question 1

what are the benefits of financial objectives

Answer 1

provide direction and can be used to measure financial performance
support decision making
used to motivate employees and teams

Question 2

what is return on investment

Answer 2

allows a business to calculate the efficiency of a project by comparing the amount invested with the amount returned

Question 3

what is the formula for return on investment

Answer 3

profit from investment / investment cost x100

Question 4

why might a business set a financial objective as long term funding

Answer 4

reduces debt (can protect a business if there is an increase in interest prices)

Question 5

what can return on investment help calculate

Answer 5

the efficiency and profitability of a project

Question 6

how do you calculate revenue

Answer 6

quantity of goods x selling price per item

Question 7

how do you calculate total costs

Answer 7

fixed costs + variable costs

Question 8

what is cash flow

Answer 8

compared cash inflows and outflows to ensure a business always has enough cash to meet its short term debts

Question 9

what would a capital structure target focus on

Answer 9

the proportion of capital received from different sources of finance

Question 10

a company has a revenue of 75 million and sells 50 million units. what is the selling price per unit

Answer 10

£1.50

Question 11

a business invests in a project. it costs 1 million. the revenue generated by the investment is 2.5 million. what is the return on investment

Answer 11

150%

Question 12

what must be considered when setting finance objectives

Answer 12

the overall business objective

Question 13

what are the internal influences on financial objectives

Answer 13

overall objectives
shareholders
different departments

Question 14

who needs to be satisfied by the objectives of the financial department

Answer 14

shareholders

Question 15

what is a cash flow forecast used for

Answer 15

for a business to estimate their total cash inflows and their total cash outflows for a future period

Question 16

what is a favourable variance

Answer 16

when actual revenue is higher than forecasted

Question 17

what is an adverse variance

Answer 17

when actual revenue is lower than expected

Question 18

what is an expenditrure budget

Answer 18

forecasts costs for a business over a period

Question 19

What is the formula for revenue

Answer 19

Quality of goods sold x selling price per unit

Question 20

Why can business that are profitable but have cash flow problems still become bankrupt

Answer 20

Lack short term cash to lay short term debts

Question 21

What is a receivable

Answer 21

Money owed to the business

Question 22

What is a debator / payables

Answer 22

Money owed to the business by others

Question 23

What is the formula for net cash flow

Answer 23

Total inflow - total outflow

Question 24

What is a revenue budget

Answer 24

Forecasts expected revenues for a business during a period

Question 25

What are the advantages of budgeting

Answer 25

Help business achieve targets and objectives
Help managers and leaders focus on cost control
Motivate staff by providing spending authority

Question 26

What is an example of budgets motivating staff

Answer 26

Many hospitals assign budgets to individual departments and this motivates department managers and staff within departments as they are given authority to place orders

Question 27

What can revenue and expenditure budgets be used to create

Answer 27

Profit budgets

Question 28

What does total inflows include

Answer 28

All cash inflows coming into the business

Question 29

What can break even analysis be used for

Answer 29

To predict the level of output at which total costs and total revenues will be the same

Question 30

What is contribution per unit

Answer 30

The amount of revenue which contributes to covering a businesses fixed costs

Question 31

How to calculate contribution per unit

Answer 31

Selling price per unit - variable cost per unit

Question 32

What is total contribution

Answer 32

The amount of revenue from the sale of all products which contributes to fixed costs once total variable costs have been taken away

Question 33

How do you calculate total contribution

Answer 33

Total revenue - total variable costs

Question 34

How can business analyse their profitability

Answer 34

Using gross profit, operating profit and profit for the year objectives

Question 35

What is gross profit

Answer 35

The amount of profit remaining once direct costs (cost of sales) have been paid to the business

Question 36

How do you calculate gross profit margin

Answer 36

Gross profit / sales revenue x100

Question 37

What is operating profit

Answer 37

The amount of profit remaining once direct costs (cost of sales) and indirect costs (expenses) have been paid by the business

Question 38

How do you calculate operating profit margin

Answer 38

Operating profit / sales revenue x100

Question 39

What is profit for the year

Answer 39

Involves the amount of profit remaining once all costs and financing fees have been considered

Question 40

How do you calculate profit for the year margin

Answer 40

Profit for the year / sales revenue x100

Question 41

A business sells pens for £0.8 per unit. The variable cost per unit is £0.4. What is the contribution per unit?

Answer 41

£0.4

Question 42

A business profit for the year margin is £40 million. The businesses sales revenue is £95 million. What is the profit margin?

Answer 42

42.11%