powell test

Question 1

financial objective

Answer 1

a goal or target pursued by the finance function within an organisation

Question 2

profit

Answer 2

the surplus of total revenue over total costs for a business over a trading period

Question 3

cash flow

Answer 3

the movement of cash into and out of a business over a period of time

Question 4

gross profit

Answer 4

income received from sales minus the cost of goods and services sold

Question 5

operating profit

Answer 5

the financial surplus arising from a business’s normal trading activities and before taxation

Question 6

profit per year

Answer 6

a measure of a business’s profits that takes into account a wider range of expenditures and incomes including taxation

Question 7

revenues

Answer 7

are the earnings or income generated by a firm as a result of its trading activities

Question 8

capital expenditure

Answer 8

spending undertaken by businesses to purchase non-current assets such as vehicles and property. It is another term for investment.

Question 9

capital structure

Answer 9

refers to the way in which a business has raised the capital it requires to purchase its assets

Question 10

budgets

Answer 10

financial plans that forecast revenue from sales and expected costs over a time period

Question 11

variance analysis

Answer 11

the process of investigating any differences between forecast data and actual figures

Question 12

cash flow

Answer 12

the movement of cash into and out of a business over a period of time

Question 13

cash flow forecast

Answer 13

state the inflows and outflows of cash that the managers of a business expect over some future period

Question 14

trade credit

Answer 14

offered when purchasers are allowed a period of time (frequently 30, 60 or 90 days) to pay for products they have bought

Question 15

break even output

Answer 15

that level of output or production at which total costs exactly equal revenue from sales.

Question 16

contribution

Answer 16

the difference between revenue and variable costs.

Question 17

margin of safety

Answer 17

measures the amount by which a business’s current level of output exceeds break-even output

Question 18

profitability

Answer 18

a measure of financial performance that compares a business’s profits to some other factors such as revenue.

Question 19

profit margin

Answer 19

a ratio that expresses a business’s profit as a percentage of its revenue over some trading period

Question 20

bank loan

Answer 20

an amount of money provided to a business for a stated purpose in return for a payment in the form of interest charges

Question 21

over draft

Answer 21

when a business is allowed to spend more than it holds in its current bank account up to an agreed limit

Question 22

venture capital

Answer 22

funds advanced to businesses thought to be relatively high risk in the form of share and loan capital.

Question 23

share capital

Answer 23

finance invested into a company as a result of the sale of shares in the business.

Question 24

mortgages

Answer 24

ong-term loans, repaid over periods of up to fifty years, and used to purchase property

Question 25

opportunity costs

Answer 25

the best alternative foregone as a result of a decision.