finance

Question 1

what is an expenditure

Answer 1

a cost

Question 2

what is a budget

Answer 2

a forward financial plan concerning the revenue and costs of a business

Question 3

3 types of budgets

Answer 3

-sales revenue or earning budget
-expenditure budget
-profit budget

Question 4

variance analysis what is favourable

Answer 4

means it’s better than expected

Question 5

variance analysis what is adverse

Answer 5

worse than expected

Question 6

what is variance analysis

Answer 6

calculating and investigating the difference between actual results and the budget

Question 7

return on capital employed calc

Answer 7

operating profit/ capital employed X100

Question 8

how to work out capital employed calc

Answer 8

total equity + non current liabilities

Question 9

cash flow objectives
3

Answer 9

-extending cash outflows to suppliers
-shortening payment period for customers
-maintaining a specific amount of cash in reserve

Question 10

importance of a financial objective
2

Answer 10

-helps plan for future
-increase chance of survival as of good management

Question 11

what is a financial objective

Answer 11

an objective/target set by finance departments

Question 12

what are receivables

Answer 12

(debtors) time takes for customers to pay back

Question 13

what are payables

Answer 13

time taken to pay back suppliers

Question 14

what are overhead/expenses

Answer 14

FC/ indirect cost

Question 15

what is a cost of sale

Answer 15

a direct cost which relates to production cost of specific goods

Question 16

why is a cash flow forecast important
3

Answer 16

-anticipates times and amounts of any cash shortages
-understand where cash has been spent
-arrange financial cover for any shortages

Question 17

what is liquidity

Answer 17

money that can be reinvested and that is accessible

Question 18

why are cash flows forecasts unreliable
2

Answer 18

it’s only a predication and demand could change

Question 19

what is the gross profit calc

Answer 19

gross profit/ sales revenue X100

Question 20

what is opening balance

Answer 20

money already in your account at the start of the month

Question 21

what is closing balance

Answer 21

the net cash flow so than that will be the next opening balance

Question 22

what is the calc for net cash flow

Answer 22

total cash inflow- total cash outflow

Question 23

limitations of budgeting
3

Answer 23

-no history to base data on
-change in tastes or advance in tech
-market research needs to be accurate

Question 24

uses of budgeting
2

Answer 24

-helps a business control its finance by planning expenditure
-targets to motivate workforce

Question 25

what is a delegated budget

Answer 25

where a budget is passed down to other employees to empower them and motivate them

Question 26

what does negative cash flow mean

Answer 26

the business does not have enough cash coming into the business to pay for its expenses

Question 27

solutions to cash flow issues 6

Answer 27

-charge higher price // PED? -decrease receivables time -reduce costs -lower salaries -lower marketing expenditure -increase time for payables

Question 28

what is working capital

Answer 28

pays for day to day running costs such as wages and sales with cash available in the business

Question 29

what is the opening balance

Answer 29

it’s money already in your account from last month

Question 30

what is closing balance

Answer 30

the net cash flow so that will be the next opening balance

Question 31

what is a payable

Answer 31

the amount of time taken by a business to pay its supplier and other creditors

Question 32

what is a receivable

Answer 32

the home take by a busiensss customers or debtors to pay a business for the products or services that is supplier

Question 33

why is a cash flow forecast important-> it enables the business too… 4

Answer 33

-anticipate timing and amounts of cash shortages -arrange financial cover for shortages -understand where cash has been spent

Question 34

why could a cash flow forecast be unreliable 4

Answer 34

-lack of experience -customers may not pay on time -material cost could increase -demand could change

Question 35

what is liquidity

Answer 35

money that is accessible

Question 36

what is a financial objective

Answer 36

an objective set by the financial department

Question 37

what is a overhead/ expense

Answer 37

fixed cost (it’s an indirect cost)

Question 38

what is cost of sale

Answer 38

production cost of specific goods

Question 39

what is financial economies of scale

Answer 39

bigger busienssss negotiate interest rates as are borrowing more money (tescos have more power as big for eg)

Question 40

what is break even

Answer 40

where costs are even with the revenue generated

Question 41

what is an interest rate

Answer 41

the cost of borrowing money

Question 42

what is the calc for contribution per unit

Answer 42

selling price per unit - variable CPU

Question 43

what is the calc for total contribution

Answer 43

contribution per unit X no sold

Question 44

what is contribution

Answer 44

the money left over after variable costs and the contribution pays off fixed costs then the rest is profit

Question 45

what’s a FC

Answer 45

a cost the doesn’t vary with output

Question 46

what is a variable cost

Answer 46

costs that vary with proportion of output

Question 47

what is contribution per unit

Answer 47

it’s the money left over after variable costs which can go to profit or FC

Question 48

what is the margin of safety

Answer 48

it’s the difference between what is curry being made and what is needed to break even

Question 49

what is debt factoring

Answer 49

it’s selling debt on

Question 50

what is a share issue

Answer 50

Choosing to sell more shares

Question 51

internal sources of finance 3

Answer 51

owners funds retained profit selling assets

Question 52

external sources of finance 9

Answer 52

debt factoring share issue bank loan overdraft venture capital (dragons den) crowd funding trade credit

Question 53

what is overtrading

Answer 53

when a business grows too fast and their outflows exceed their inflows

Question 54

what is venture capital

Answer 54

it’s a form of financing typically provided by individuals or firms to small for high risk, high growth potential with specialist investors

Question 55

what is capital expenditure

Answer 55

spending on businesses resources that can be used repeatedly over a period of time (1+ year ) eg machinery

Question 56

what is revenue expenditure

Answer 56

spending on business resources that have already been consumed or will be very shortly

Question 57

what is capital

Answer 57

the money a company needs to function and to expand

Question 58

advantages of crowd funding 3

Answer 58

-quick -keep control can raise large sums in short time

Question 59

disadvantages of crowd funding

Answer 59

-business ideas exposed to public-> competitors -uncertainty if people will invest

Question 60

advantages of bank loads 2

Answer 60

-allows repayment over a long period of time -does not dilute ownership

Question 61

disadvantages of bank loans 2

Answer 61

-shareholders/owners may oppose the decision -banks may want assets for security

Question 62

2 advantages for retained profit

Answer 62

-no interest -does not have to be payed back

Question 63

2 disadvantages of retained profit

Answer 63

-can be limited -only available for profitable businesses

Question 64

2 advantages for selling shares

Answer 64

-flexible -can raise large sums of money

Question 65

2 disadvantages of selling shares

Answer 65

-loss of control -may not find a buyer

Question 66

2 advantages for venture capital

Answer 66

-no interest and specialist support -do not have to pay back

Question 67

short term sources of finance 3

Answer 67

-retained profit -overdraft -debt factoring

Question 68

Long term sources of finance

Answer 68

share capital, retained profit, venture capital, loan, mortgage, sale of assets