Unit 6

Question 1

What are the benefits of having a positive cash flow?

Answer 1

Don’t need to borrow money so no interest
Able to have long term loan arrangements
Reduce risk of failure

Question 2

What is a cash forecast

Answer 2

Plan of the expected inflows and outflows over time

Question 3

What is a cash statement

Answer 3

Record of the previous inflows and outflows of the business (helps with further management of cash)

Question 4

What are some causes of cash flow problems

Answer 4

Poor management (Not planning + spending to much)
Business is making a loss ( run out of cash)
Offering customers to long to pay (Unable to pay bills)

Question 5

What are some soloutions to cash flow problems

Answer 5

Reschedule payments ( delay outflow)
Cut costs (Reduce outflow)
Use overdrafts (loans=money)
Find new sources of inflow (inc inflow)

Question 6

How does someone analyse cash flow

Answer 6

Revenue - is it growing? How to change?
Payments - Increasing? Which is biggest? Reduce? Consequence?
Net cash flow - Is inflow>outflow?
Closing balance- what? why?

Question 7

How to calculate % change

Answer 7

difference or change/
original x100

Question 8

How to calculate Revenue

Answer 8

Price x units sold

Question 9

How to calculate Total costs

Answer 9

Variable costs + fixed costs

Question 10

How to calculate market share

Answer 10

Sales value of business /
Sale value of whole market x100

Question 11

External sources of finance

Answer 11

Friends, Loans

Question 12

Internal sources of finance

Answer 12

Retained profits, sale of stock, owner investment

Question 13

Gross profit

Answer 13

Revenue - Cost of sales

Question 14

Net profit

Answer 14

Operating profit - tax - finance costs

Question 15

Closing balance

Answer 15

Opening balance + net cashflow

Question 16

Net cash flow

Answer 16

Inflows - Outflows

Question 17

What is Ratio analysis

Answer 17

Method of assessing a firms financial situation by comparing two sets of linked data

Question 18

What is Gross Profit margin

Answer 18

Gross profit/sales revenue

Question 19

What is Net profit margin

Answer 19

Net profit margin before tax/ sales revenue

Question 20

What is return on capital employed

Answer 20

Net profit before tax/
capital employed

Question 21

What is a Liquidity ratio

Answer 21

Analyses of debt, Can you pay off debt with cash

Question 22

What is Current ratio

Answer 22

Current asset/ Current liability

Question 23

Acid test

Answer 23

Current assets -stock/ current liability

Question 24

What are some examples of non current assets

Answer 24

Land
Building
Vehicles

Question 25

What are some examples of current assets

Answer 25

Stock
Debtors
Cash

Question 26

What is Inter-firm

Answer 26

Between companies

Question 27

Intra Firm

Answer 27

Within company to measure relative efficiency

Question 28

Comparison too a standard

Answer 28

Certain levels of performance are recognised

Question 29

Comparisons over time

Answer 29

To register trends in % and allow for exceptional circumstances

Question 30

Average rate of return

Answer 30

A simple method of calculating whether a project is worthwhile.

Question 31

What is the calculation for ARR

Answer 31

(total profit from investment/ number of years)/
initial cost of investment