Finance past paper questions

Question 1

Describe the purpose of preparing a Statement of Financial Position.

Answer 1

Shows the assets and liabilities of a business
show how much the business is worth at a particular time
can be used to compare with previous years
to provide information for decision making
can be used to calculate ratios
shows the work equity figure

Question 2

Explain the purpose of preparing a cash budget.

Answer 2

A cash budget will highlight a deficit. This means it will give the organisation time to arrange finance and find a solution
a cash budget will highlight a surplus. This means it will give the organisation time to arrange investments
to give departments a budget to focus on. this means it will help the business stay within the budget which is predicted.
to make comparisons between predicted and actual figures. this means the performance of the business can be monitored
will monitor spending throughout the organisation. This means it will ensure the organisations finances are used effectively

Question 3

Explain the use of technology by the finance department

Answer 3

Spreadsheet can be used to produce graphs and charts. this means it is easy to identify any changes in profits over a period of time
By using spreadsheet the formulae used can be replicated. this means time is saved where the employee can be doing something else
word can be used to produce financial reports for shareholders. tis means that shareholders can get all the information they need in an easy to read format

Question 4

Describe how an organisation could improve their liquidity

Answer 4

use just in time stock management
increase their current assets
reduce their current liabilities
reduce theft or breakages of stock

Question 5

Describe the finance departments objectives

Answer 5

spend taxpayers money wisely
stay within a budget

Question 6

Explain the limitations of ratio analysis

Answer 6

all information is historic. this means they may not be relevant to the current situation
can only be compared with other similar sized business. This means the number of organisations to compare to can be difficult to find

Question 7

Discuss the use of cash budgets

Answer 7

can be used to monitor spending throughout an organisation
also, it can highlight a period of a deficit to allow the organisation time to find a solution
in addition, it can be used to highlight a surplus to allow the organisation time to arrange investments
they are time consuming to prepare
they are prediction and it can be difficult to look too far into the future
they cannot predict changes in external factors

Question 8

Describe how technology can help improve the finance department of an organisation

Answer 8

spreadsheet allow for greater accuracy when producing financial statements
email can be used to send customers a copy of their receipt
online banking can be used to quickly check balances and pay invoices

Question 9

Describe the reasons why a competitor may be interested in the financial
information of an organisation.

Answer 9

to measure the organisations market share
to find out if they may be a target for takeover
to help their own decision making
to compare prices

Question 10

Explain the possible reasons for the Gross Profit figure improving

Answer 10

the organisation could have switched to a cheaper supplier. this means cost of sales will decrease

Question 11

describe the reasons for using ratios to analyse performance

Answer 11

they alllow the business to compare its performance with that of competitors
highlight areas of improvement in the organisation
performance can be compared with previous years
can provide information to decision makers