Sustainable Profitability

Question 1

Defintion of sustainable profitablility (3)

Answer 1

Business ability to manufacture products over long period of time to cover all expenses and show proft

Question 2

What must the business do to be profitably sustainable (scenario based)

Answer 2

Manufacture and sell enough products over long time without depleting money available and make profit

Question 3

Possible characteristics of profitable sustainable business

Answer 3

Adds new products
Large target market
Long shelf life
Delivers range of productd to wide market

Question 4

The purpose of viability study (4)

Answer 4

Identify strong and weak points

Clear idea of viability if business plan

Make projections and able to adapt

Answer questions like - should u go ahead with the business idea? Or should you be doing before starting a new business

Question 5

First step in financial viable study

Answer 5

List total cost and expenses:
Start up
Production
Operating costs
Fixed expenses
Variable expenses

Question 6

Step 2 in study

Answer 6

Predict possible income from sales

Question 7

Step 3 in study

Answer 7

Calc profit mark up (sales price = cost price + profit mark up)

Question 8

Step 4 )

Answer 8

Calc how long till take to cover stsrt up costs

Start up needs :
Amt needed to Start and maintain
3yrs to become self sufficient

Question 9

Step 5

Answer 9

Decide if sales for this period of time csn be maintained to make project viable

Question 10

Defintion of mark up (4)

Answer 10

Mark up is % that is added to cost price and must cover overhead expenses and leave money for product

Question 11

Best sales scenario (3)

Answer 11

Forecast of business if product sells well that the sales target is met and profit is made

Question 12

Worst sales scenario ( 3)

Answer 12

Forecast of business if product sells poorly that sales are less than break even point

Question 13

make cash flow forecast (4)
*nb

Answer 13

1) without forecasting in order to budget and plan how available funds will be spent and business can go bankrupt

2) det is business reaching financial goals

3) ident cash flow problem in future

4) ensures business will have cash to pay suppliers

Question 14

How to make cash flow forecast
*nb

Answer 14

Identify sales goals
Calc month total expenditures
Subtract total expenditures from total income
Calc closing bank balance by adding surplus defict to opening balance at start of month
Carry closing balance over as opening balance