Finance

Question 1

Break even point

Answer 1

this is where the business n making neither a profit or a loss.
A business “breaks even” when it’s sales equal its total cost.
TOTAL COSTS= FIXED COSTS + VARIABLE COSTS

BE= fixed costs
selling price- variable costs

Question 2

Cash budget

Answer 2

cash flow- the amount of cash in a business
A cash budget is an estimate of a company’s inputs and outputs over a period of time.

RECEIPTS- money coming in(sales,loans)
PAYMENTS- money going out(expenses,wages,VAT/TAX)

Question 3

Poor cash flow causes

Answer 3

• spending too much money on stock that has not sold
• giving customers too long to pay their debts
• not making enough from sales
• owners taking taking too much money from the business

Question 4

Improving cash flow

Answer 4

• look for a cheaper supplier of raw materials(reduce variable costs)
• sell equipment that is no longer needed
• increase marketing activities
• offer discounts to customers who pay on time
• take out a bank loan

Question 5

Forecasting

Answer 5

Cash budgets can take past info to help predict the future
if accurate, this can be v helpful;
seasonal changes(easter/christmas) may be difficult to predict

Question 6

Terms

Answer 6

REVENUE- money made from sales

PRODUCTION COSTS- costs associated with being in business

GROSS PROFIT- basic profit made by the business(calculated before production costs are deducted)

PROFIT FOR THE YEAR- the final profit made by the business after production costs are deducted from gross profit

Question 7

Income statement

Answer 7

shows the profit or loss made by a business over a period of time.
shows how much money has come into to the organisation(income) and how much has been spent(expenses)