Key terms

Question 1

Contribution

Answer 1

This is the amount of money that remains after subtracting variable costs from sales revenue. It helps businesses understand how much money is available to cover fixed costs and contribute to profits.

Question 2

Variable cost

Question 3

Fixed cost

Question 4

Direct cost

Question 5

Indirect cost

Question 6

Cost-volume-profit

Question 7

Full costing

Question 8

process-costing

Question 9

job costing

Question 10

Overtrading

Answer 10

Four signs of overtrading - when you sell more than you can fund.
1. Increase in sales revenue (without an increase in sales revenue
2. Increased relience in short term finance
3. Increase in current assets
4. Decline in liquidity ratios

Question 11

Financial ratios

Question 12

Efficiency ratios

Question 13

Gearing/Capital structure

Answer 13

Gearing:
Investment cover ratio

Question 14

Investment ratios

Question 15

Liquidity ratios

Answer 15

Current ratio
Acid test ratio

Question 16

Margin of safety

Question 17

Accrual

Question 18

Prepayment

Question 19

Residual value

Question 20

Estimated lifetime value