Theme 2 key terms

Question 1

Extrapolation

Answer 1

The use of trends established by historical data to make predictions on future values

Question 2

Cash flow forecast

Answer 2

An analysis of estimated cash inflows and outflows over a future period

Question 3

Correlation

Answer 3

Method of forecasting that looks at the strength of a relationship between two variables

Question 4

Confidence intervals

Answer 4

The percentage probability that an estimated range of possible values

Question 5

Revenue

Answer 5

Quantity X Selling price

Question 6

Costs

Answer 6

Fixed costs + Variable costs

Question 7

Profit

Answer 7

TR - TC

Question 8

Contribution

Answer 8

The difference between the total revenues and total variable Costs

Question 9

Contribution per unit

Answer 9

The difference between the selling price per unit and variable cost per unit

Question 10

Margin of Safety

Answer 10

The difference between actual output and break even output

Question 11

Break even

Answer 11

The output at which TC = TR

Question 12

Budget

Answer 12

Financial plan for the future concerning the revenues and costs of a business

Question 13

Variance analysis

Answer 13

Calculating and investigating the differences between actual results and the budget

Question 14

Historical budget

Answer 14

Budget initially based on the figures from the previous period (year)

Question 15

Zero based budget

Answer 15

Budget built entirely from the bottom up with completely new assumptions.

Question 16

Positive variance

Answer 16

Actual result is better than budget

Question 17

Adverse variance

Answer 17

Actual result is worse than budget

Question 18

Gross profit

Answer 18

TR - cost of sales

Question 19

Operating profit

Answer 19

Gross profit - overheads

Question 20

Profit for the year

Answer 20

Operating profit - finance cost and taxation

Question 21

Current ratio

Answer 21

A liquidity ratio calculated by dividing current assets/current liabilities

Question 22

Acid test ratio

Answer 22

(Current assets - stock)/current liabilities

Question 23

Working capital

Answer 23

a measure of a company’s liquidity, or its ability to pay its short-term liabilities and finance its day-to-day operations

Question 24

Credit control

Answer 24

The management of amounts owed on credit by the customers of a business

Question 25

Debt factoring

Answer 25

Selling the rights to collect amounts owed by customers in order to release cash flow

Question 26

Management control

Answer 26

Systems and processes that enable a business to be effectively managed

Question 27

External shock

Answer 27

A change in the external business environment that significantly impacts a business.

Question 28

Economy of scale (EOS)

Answer 28

The effect of unit costs falling as output rises

Question 29

Unit cost

Answer 29

The average cost per unit produces

Question 30

Capacity

Answer 30

The potential output of a business

Question 30

Capacity utilisation

Answer 30

The proportion of a businesses capacity that is being used

Question 31

Spare capacity

Answer 31

Where actual output is less then capacity

Question 32

Excess demand

Answer 32

Where demand is higher then capacity.

Question 33

UP TO 2.4