Comp 3 LA C

Question 1

Cash inflows

Answer 1

Receipts entering an enterprises bank account.

Question 2

Cash outflows

Answer 2

Payments leaving an enterprises bank account.

Question 3

Cash flow statement

Answer 3

Statement of actual cash inflows and outflows over a period of time.

Question 4

Cash flow forecast

Answer 4

Forecast of cash inflows and outflows over a period of time.

Question 5

Break-even

Answer 5

Point where income and expenditure are equal.

Question 6

Margin of safety

Answer 6

Difference between actual and break-even output.

Question 7

Contribution

Answer 7

Amount each sale contributes to paying fixed costs.

Question 8

Capital expenditure

Answer 8

Purchase of fixed assets.

Question 9

Revenue expenditure

Answer 9

Purchase of goods needed for day to day operations.

Question 10

Monthly net cash flow

Answer 10

total cash inflows (receipts) – total cash outflows (payments)

Question 11

Opening balance

Answer 11

closing balance of the previous month

Question 12

Closing balance

Answer 12

opening balance + monthly net cash flow

Question 13

Contribution per unit

Answer 13

selling price per unit – variable cost per unit

Question 14

Break-even point

Answer 14

fixed costs / contribution per unit

Question 15

Margin of safety

Answer 15

actual output – break-even output

Question 16

Retained profit

Answer 16

Long term source of finance – seen in statement of financial position. No interest charged.

Question 17

Owner funds

Answer 17

Low risk as it does not affect working capital.

Banks more likely to loan if the owner has used some of their own capital.

Question 18

Sale of asset

Answer 18

Items owned by the enterprise are sold.

Enterprise using funds of its own so no interest to pay.

Question 19

Bank loan

Answer 19

Agreed amount, paid over a set period with interest charged.

Question 20

Leasing equipment

Answer 20

Borrow equipment for set period paying a fee.

Question 21

Hire purchase

Answer 21

Purchase equipment and pay back over a period of time.

Question 22

Government grants

Answer 22

Financial incentives to aid economic growth.

Question 23

Venture capital

Answer 23

Individual offers investment for agreed % return.

Question 24

Peer to peer lending

Answer 24

Opportunity for individuals to invest via an online portal.

Question 25

Bank overdraft

Answer 25

Quick to arrange so good short term solution to debt.

Needs to be repaid in short period of time with interest charged.

Question 26

Trade credit

Answer 26

Gives enterprise more cash in immediate future.

Bills usually settled within 30, 60 or 90 days.