Theme 2💙

Question 1

What are sources of finance?

Answer 1

The options available of where to raise funds from
Can be internal or external

Question 2

What is owners capital?

Answer 2

When an entrepreneur invests their personal savings into the business

Question 3

Three benefits of owners capital:

Answer 3

1. Don’t have to repay anyone
2. No interest
3. Control over what the money is spent on

Question 4

Two limits of owners capital:

Answer 4

1. Large investment needed
2. Threat to personal finances (house, family, lifestyle)

Question 5

What is retained profit

Answer 5

Profit that is left over at the end of the year (for owners use)

Question 6

Name one benefit and one limitation of retained profit

Answer 6

+ RP is not spent on interest payments
- RP costs dividend payments which leads to shareholder dissatisfaction

Question 7

What are the sale of assets?

Answer 7

Assets are sold to generate immediate finance

Question 8

What is break even?

Answer 8

The point that a business is not making a profit or a loss, total costs must be the same as total revenue

Question 9

What is break even output?

Answer 9

The number of items that a business must sell to reach the break even point

Question 10

What is contribution?

Answer 10

Each product sold contributes to the profits

Question 11

What is the contribution formula?

Answer 11

Selling price-variable costs

Question 12

What is the total contribution formula?

Answer 12

Total sales revenue- total variable costs

Question 13

Break even formula

Answer 13

Fixed costs / contribution

Question 14

Break even formula

Answer 14

Fixed costs / contribution

Question 15

Strengths of break even?

Answer 15

1. Target
2. Accurate decision making
3. Calculate the mini amount of sales needed to reach B-E point

Question 16

2 weaknesses of break even?

Answer 16

1. Unreliable -based on predictions of costs and variables, fixed costs can also change
2. Relies on the number of sales needed -not actual sales completed

Question 17

What is revenue?

Answer 17

The money from the sale of goods and services

Question 18

Formula for SR, SP and SV
Hint: triangle

Answer 18

Sales revenue/
Selling price x sales volume

Question 19

What is profit and profit formula?

Answer 19

Profit is money from sales revenue
Total cost - total revenue
P= T-T

Question 20

What is revenue and revenue formula?

Answer 20

Revenue is the money from sales
Total rev= Selling price x number sold

Question 21

What are the types of profit?

Answer 21

Gross profit
Operating profit
Profit for the year (Net profit)

Question 22

Gross profit margin formula

Answer 22

Gross profit / sales revenue x 100

Question 23

Operating profit margin formula

Answer 23

Operating profit / sales revenue x 100

Question 24

Net profit margin

Answer 24

Profit for the year / sales revenue x 100

Question 25

What is Appreciation?

Answer 25

An increase in the value of a currency

Question 26

What is Depreciation?

Answer 26

A decrease in the value of a currency

Question 27

What does SPICED stand for?

Answer 27

Strong pound: imports dearer, exports cheaper

Question 28

What does WPIDEC stand for?

Answer 28

Weak pound: imports cheaper, exports dearer

Question 29

Some examples of cash outflows

Answer 29

Buying stock
Paying wages
Utility bills
Suppliers payments
Tax

Question 30

Why are trade creditors a current liability for a business?

Answer 30

Trade creditors are suppliers who has sent your business goods but has not been paid yet

Question 31

What is foreign direct investment

Answer 31

When a business with a head office in one country sets up factories/offices etc in another country