3.5 Financial

Question 1

Financial objectives

Answer 1

Revenue, costs, profit, cash flow and return on investment objectives

Question 2

Internal factors on financial obj

Answer 2

Overall objectives of business, status of business, other dep

Question 3

External factors of financial obj

Answer 3

Availability of finance, competitors, economy, shareholders

Question 4

Profit

Answer 4

money earned by a business when its total revenue exceeds its total expenses

Question 5

Profitability

Answer 5

Amount of profit relative to revenue or investment.

Question 6

Cash flow forecast

Answer 6

Show amount of money businesses expect to flow in and out of the business

Question 7

Budget

Answer 7

Financial plan for the future

Question 8

Variance

Answer 8

Difference between actual figures and budgeted figures

Question 9

Favourable variance

Answer 9

Increased profit

Question 10

Adverse variance

Answer 10

Reduces profits

Question 11

Why can variances still be bad?

Answer 11

When variances occur, it means that what has happened is not what the business was expecting.

Question 12

Break even

Answer 12

Level of sales a business needs to cover its costs

Question 13

Break even chart

Answer 13

NEEDS TO BE LOOKED AT!!

Question 14

Margin of safety

Answer 14

Amount between actual output and break even

Question 15

Gross profit

Answer 15

Sales revenue - cost of sales

Question 16

Operating profit

Answer 16

Sales revenue - cost of sales - operating expenses

Question 17

Profit for the year

Answer 17

Operating profit + other profit - net finance costs - tax

Question 18

GPM

Answer 18

gross profit divided by sales rev x 100

Question 19

Operating profit margin

Answer 19

Operating profit/sales rev x 100

Question 20

Debt factoring

Answer 20

When banks and other financial institutions take unpaid invoices off the hands of the business, and give them instant cash payment.

Question 21

Payables

Answer 21

Debts owed by a business

Question 22

Recieveables

Answer 22

Money owed to the business by customers or any assets etc

Question 23

Overdraft

Answer 23

Where a bank lets a business have a negative amount of money in its bank account but then pay interest on that.

Question 24

Loans

Answer 24

Businesses can borrow a fixed amount of money and pay it back over a fixed period of time with interest.

Question 25

Retained profit

Answer 25

Profit can be kept and built up over the years for later investment

Question 26

Share capital

Answer 26

Money raised by selling shares in the business

Question 27

Venture capital

Answer 27

Funding in the form of share or loan capital that is invested in a business that is thought to be high risk.

Question 28

Crowdfunding

Answer 28

Business uses contributions made by a large number of people.

Question 29

Improving cash flow

Answer 29

Overdrafts, business can hold less stock, reduce time between paying suppliers and getting money from customer, credit controllers, debt factoring, sale and leaseback.

Question 30

Improving profitability

Answer 30

Reduce costs, increase turnover, increase effiency, increase productivity