Liquidity and balance sheets

Question 1

Ways to increase revenue

Answer 1

• Increase prices
• Add value to the product, increase benefits and features
• Create desire/ awareness through marketing

Question 2

Ways to reduce costs

Answer 2

• Reduce production costs
• Improve efficiency
• Lower overheads, move to a cheaper location

Question 3

Why are businesses unprofitable ?

Answer 3

• No demand for the product
• Selling at the wrong price
• Low contribution per unit
• Poor management of costs

Question 4

What is a balance sheet ?

Answer 4

This is a snapshot of the business’ assets (what it owns or is owed) and its liabilities (what it owes) on a particular day - usually the last day of a financial period

Question 5

What can we find out from a balance sheet ?

Answer 5

• The value of a business (equity)
• The current assets a business holds
• Short term liabilities the business will need to pay
• The liquidity of a business
• The long term debts of a business
• How a business has been financed