Knowledge Test 14 Dec

Question 1

Revenue

Answer 1

The value of goods and services sold

Question 2

Fixed costs

Answer 2

They are not immediately affected by a change in the number of products sold (e.g. rent & rates, salaries, insurance, advertising, electricity & gas)

Question 3

Variable Cost

Answer 3

They are immediately affected by a change in the number of products sold (e.g. purchases of goods or materials, packaging, overtime & bonuses)

Question 4

Total Cost formula

Answer 4

Fixed Cost + Variable Cost

Question 5

Profit formula

Answer 5

Revenue - Total Cost

Question 6

Break-even point

Answer 6

The level of sales where revenue is exactly equal to total costs.

Question 7

Cash flow

Answer 7

Cash received by a business (inflows) and cash paid by a business (outflows). It mainly refers to money received and paid through the bank account

Question 8

Revenue formula

Answer 8

Selling price x Number of units sold

Question 9

Variable costs formula

Answer 9

VC per unit x Number of units sold

Question 10

Total Cost formula

Answer 10

Variable costs + Fixed costs

Question 11

Profit or Loss formula

Answer 11

Revenue – Total costs

Question 12

Break-even point (in units)

Answer 12

Fixed costs ÷ (Selling price – Variable cost per unit)

Question 13

Margin of safety

Answer 13

Actual level of units sold - break even point

Question 14

Net cash flow

Answer 14

Inflows (cash received) – Outflows (cash spent)
Net cash flow is not the same as profit

Question 15

Income Statement

Answer 15

It shows revenue, cost of sales, and expenses to calculate profit

Question 16

Revenue

Answer 16

The value of goods and services sold

Question 17

Cost of sales

Answer 17

The costs to the business of buying or making the goods or services that it has provided. These are the variable costs of the business.

Question 18

Gross Profit

Answer 18

Revenue- Cost of sales

Question 19

What are expenses?

Answer 19

Fixed costs of the business

Question 20

Profit

Answer 20

Gross profit - expenses

Question 21

Statement of Financial Position

Answer 21

This summarises the assets and liabilities of a business, as well as its capital or equity

Question 22

Asset

Answer 22

Assets are owned by a business. They may be non-current assets or current assets

Question 23

Non-current assets

Answer 23

They are owned and used for over a year: land and buildings, machinery, equipment, vehicles, furniture

Question 24

Current assets

Answer 24

They include inventory (stock), trade receivables (amounts owed by credit customers) and bank and cash balances

Question 25

Liabilities

Answer 25

They are owed by a business. They may be non-current liabilities or current liabilities

Question 26

Non current liabilities

Answer 26

They take more than a year to be repaid; e.g. bank loans and mortgages

Question 27

Current liabilities

Answer 27

They will be repaid within one year; bank overdraft, trade payables (amounts owed to credit suppliers) and taxes

Question 28

Cash flow statement

Answer 28

It summarises the actual cash inflows and cash outflows that have taken place

Question 29

Cash flow forecast

Answer 29

This is a prediction of future cash movements: cash inflows, cash outflows, net cash flows and closing & opening balances

Question 30

Net cash flow

Answer 30

Inflows - Outflows

Question 31

Closing Balance

Answer 31

The balance at the end of the period
Closing Balance = Opening balance + Net cash flow

Question 32

Opening Balance

Answer 32

The balance at the start of the period
Opening Balance = The previous period’s closing balance