Management Accounting/ Accounting and Finance

Question 1

What is break-even?

Answer 1

how many products need to be sold before all costs are covered

Question 2

What are fixed costs?

Answer 2

costs that never change (eg) rent or insurance

Question 3

What are variable costs?

Answer 3

costs that vary (eg) wages, ingriedients

Question 4

What is the formula for break even?

Answer 4

fixed costs / contributions (mark up on each product)

Question 5

What is margin of safety?

Answer 5

How many products you are above the break even point (saftey)

Question 6

Give 1 + and 1 - of break even.

Answer 6

+ sets targets

- unexpected costs many arise

Question 7

What are business costs?

Answer 7

Any costs to the business (variable, fixed )

Question 8

What is business revenue?

Answer 8

how much the business is making from sales

Question 9

How is revenue calculated?

Answer 9

selling price x quantity sold

Question 10

What is investment?

Answer 10

spend money now and see greater return

Question 11

What are capital goods?

Answer 11

goods purchased such as machinery, buildings

Question 12

What is an investment appraisal?

Answer 12

how a business decides if an investment project is worthwhile

Question 13

Formula for payback?

Answer 13

intial costs / profit each year

Question 14

Formula for average rates of return?

Answer 14

(average annual accounting profit / initial investment) x 100

Question 15

What is net present value?

Answer 15

time value of money, principal that money will be worth more in the future

Question 16

What is budget?

Answer 16

allocating set amounts of money each month for various expenses

Question 17

What is variance?

Answer 17

where there is difference between planned budget and the actual budget

Question 18

Give 1 + and 1 - of setting a budget.

Answer 18

+ allow departments to know budgets

- disregard unforeseen costs

Question 19

What is zero budgeting?

Answer 19

no set budget, you have to justify costs to manager

Question 20

What is cash flow?

Answer 20

money going into and coming out of the business

Question 21

What are the 3 ‘terms’ of sources of finance?

Answer 21

short, long and medium

Question 22

What are 3 internal sources of finance?

Answer 22

• retained profits
• personal savings
• sale/lease back

Question 23

What are 3 external sources of finance?

Answer 23

• trade credit
• overdraft
• loan

Question 24

What are income statements?

Answer 24

shows the profits of the year, with minus costs

Question 25

What are balance sheets?

Answer 25

value of the business at any one time

Question 26

What is business value?

Answer 26

How its financed

Question 27

What are liabilities?

Answer 27

what you owe (non-current and current assets)

Question 28

What is depreciation?

Answer 28

method of relocating the cost of a tangible asset over its useful life span

Question 29

What is working capital?

Answer 29

short term finance required for the day-to-day running of a business

Question 30

What is a stock market?

Answer 30

market where shares and debentures are bought and sold; only public companies have their shares traded on stock market

Question 31

What is unit cost?

Answer 31

to cost of producing one unit

Question 32

How do we calculate unit cost?

Answer 32

total cost / output

Question 33

Formula for contribution?

Answer 33

revenue - variable costs

Question 34

Formula for contribution per unit

Answer 34

price - variable costs per unit

Question 35

What is profit?

Answer 35

total contribution - fixed costs

Question 36

What is internal rate of return?

Answer 36

the discount ate at which the NPV is equal to zero

Question 37

What is delegation?

Answer 37

passing on responsibility, usually to someone at a lower level in the organisation

Question 38

What is liquidity ratio?

Answer 38

simple ways to assess the level of cash within a business

Question 39

Formula for current ratio?

Answer 39

current assets/current liabilities

Question 40

Formula for acid test ratio?

Answer 40

(current assets-stock) / current liabilites

Question 41

Formula for gross profit margin

Answer 41

(gross profit / sales)x 100

Question 42

Formula for net profit margin

Answer 42

(net profit margin/sales)x 100

Question 43

What are index numbers?

Answer 43

numbers used for comparison

Question 44

What is the formula for index numbers?

Answer 44

(no. in year required / no. in base year) x 100

Question 45

What are statements of financial position?

Answer 45

a method of recording the value or wealth of a business at a given moment in time

Question 46

Explain goodwill.

Answer 46

a business has a reputation, if it is good, then a business benefits from this

Question 47

Formula for return on capital employed

Answer 47

(net profit/capital employed)x 100

Question 48

Formula for efficiency

Answer 48

(revenue/non-current assets) x 100