3.5.1

Question 1

operating profit formula

Answer 1

gross profit - fixed costs (expenses)

Question 2

gross profit formula

Answer 2

revenue - cost of sales (variable costs)

Question 3

profit for the year formula

Answer 3

operating profit - interest and tax costs

Question 4

what is a financial objective?

Answer 4

a goal of target pursued by the finance department within an organisation

Question 5

what are examples of financial objectives?

Answer 5

• revenue objectives
• cost objectives
• profit objectives
• cash flow objectives

Question 6

why do businesses set financial objectives?

Answer 6

• managers can judge performance of the establishment
• new businesses may be vulnerable to running out of cash- cash flow objectives may help managers to avoid this
• many plcs are judged by profits made over a year- levels of profits impact its share price and ability to negotiate loans