finance

Question 1

gross profit margin?

Answer 1

gross profit divided by revenue x 100

Question 2

gross profit definition?

Answer 2

total revenue - cost of goods sold

Question 3

net profit margin equation?

Answer 3

net profit divided by revenue x 100

Question 4

net profit?

Answer 4

total revenue minus total expenses

Question 5

average rate of return definition?

Answer 5

way of comparing profitability of different choices over the expected life of an investment

Question 6

average rate of return equation?

Answer 6

average annual profit divided by initial investment x 100

Question 7

margin of safety meaning?

Answer 7

difference between actual sales and break even sales

Question 8

margin of safety equation?

Answer 8

actual sales minus break even point/
output minutes break even point

Question 9

sources of finance?

Answer 9

1. bank loans 2. retained profit 3. hire purchase 4. trade credit 5. government grant 6. overdraft 7. new shares issue 8. family and friends 9. selling of assets (unwanted) 10. mortgage 11. owners funds

Question 10

trade credit?

Answer 10

business gives you the product and then you agree on a later date to pay for it

Question 11

hire purchase?

Answer 11

buying assets in instalments (typically per month for a certain amount of years)- product is not fully owned by the business until the final payment is made.

Question 12

retailer?

Answer 12

someone who directly sells products to the customer

Question 13

wholesaler?

Answer 13

• business that buys in large quantities of products from producers, break bulk and sell to retailers
• break bulk= transporting pieces of goods individually, instead of shipping in one container

Question 14

non-current asset (fixed asset)

Answer 14

an asset that a business intends on keeping/owning for over a year
- for example, cars, property, equipment

Question 15

current asset

Answer 15

an asset that a business intends on keeping/owning for less than a year and is cash/ can easily be turned into cash
- for example, stock or money owned from customers

Question 16

fixed cost?

Answer 16

cost that does not change with output
- for example, rent, insurance, salaries

Question 17

variable cost?

Answer 17

cost that changes based on the amount of output
- for example, ingredients, raw materials, wages

Question 18

e-commerce?

Answer 18

buying or selling of goods or services (or transmitting funds or data) online
- for example, internet

Question 19

m-commerce?

Answer 19

buying or selling goods or services on a mobile device
- for example, a mobile phone, via apps

Question 20

revenue equation?

Answer 20

price per unit x units sold