Finance past paper questions

Question 1

Describe the purpose of preparing a Statement of Financial Position.

Answer 1

Shows the assets and liabilities of a business
show how much the business is worth at a particular time
can be used to compare with previous years
to provide information for decision making
can be used to calculate ratios
shows the work equity figure

Question 2

Explain the purpose of preparing a cash budget.

Answer 2

A cash budget will highlight a deficit. This means it will give the organisation time to arrange finance and find a solution
a cash budget will highlight a surplus. This means it will give the organisation time to arrange investments
to give departments a budget to focus on. this means it will help the business stay within the budget which is predicted.
to make comparisons between predicted and actual figures. this means the performance of the business can be monitored
will monitor spending throughout the organisation. This means it will ensure the organisations finances are used effectively