BUSINESS FINANCES (UNIT 3) Flashcards
(25 cards)
What is the main purpose of a business plan?
To outline the goals, strategies, and financial forecasts of a business.
True or False: Profit is calculated by subtracting total expenses from total revenue.
True
Fill in the blank: The formula for calculating gross profit is _____ - Cost of Goods Sold.
Revenue
What are fixed costs?
Costs that do not change with the level of production or sales.
What is the definition of cash flow?
The total amount of money being transferred in and out of a business.
Multiple Choice: Which of the following is considered a variable cost? A) Rent B) Salaries C) Raw materials
C) Raw materials
What does break-even analysis help a business determine?
The point at which total revenue equals total costs.
True or False: A budget is a financial plan that estimates future income and expenses.
True
What is a balance sheet?
A financial statement that summarizes a company’s assets, liabilities, and equity at a specific point in time.
Fill in the blank: The money a business earns from sales is known as _____ revenue.
Sales
What is the difference between gross profit and net profit?
Gross profit is revenue minus cost of goods sold; net profit is gross profit minus all other expenses.
Multiple Choice: Which of the following is an example of a long-term liability? A) Accounts payable B) Mortgage C) Wages payable
B) Mortgage
What is the purpose of financial ratios?
To evaluate the financial performance and health of a business.
True or False: Equity represents the owner’s claim on the assets of the business.
True
What does liquidity measure?
A company’s ability to meet its short-term obligations.
Fill in the blank: The _____ ratio is calculated by dividing current assets by current liabilities.
Current
Multiple Choice: Which financial statement shows a company’s profitability over a period of time? A) Balance sheet B) Cash flow statement C) Income statement
C) Income statement
What is a cash flow forecast?
A prediction of future cash inflows and outflows over a specific period.
True or False: Depreciation is the process of allocating the cost of a tangible asset over its useful life.
True
What is working capital?
The difference between current assets and current liabilities.
Fill in the blank: A _____ is a detailed account of all the income and expenses incurred by a business.
Profit and loss statement
What does ROI stand for?
Return on Investment
Multiple Choice: Which of the following is NOT a source of finance for a business? A) Bank loan B) Equity financing C) Personal savings D) Market research
D) Market research
What is the significance of the debt-to-equity ratio?
It indicates the relative proportion of debt and equity used to finance a company’s assets.
