Putting a business into practice

Question 1

Financial Objectives

Answer 1

Targets expressed in money terms such as making a profit, earning income or building wealth.

Question 2

SMART

Answer 2

Specific, measurable, achievable, realistic and timed

Question 3

The amount of income received from selling goods or services over a period of time .

Answer 3

Revenues
Sales Revenue
Turnover
Sales Turnover

Question 4

What is the equation for total revenue?

Answer 4

Price x Quantity = Total Revenue

Question 5

Sales volume

Answer 5

The number of items or products or services sold by a business over a period of time.

Question 6

What are fixed costs and give two examples?

Answer 6

Costs that don’t vary with the output produced.

Examples : rent, advertising costs, wages and salaries

Question 7

Total Costs are…

Answer 7

all the costs of the business. It is equal to the fixed costs plus variable costs.

Question 8

What is the equation for total costs ?

Answer 8

Fixed Costs + Variable Costs

Question 9

Variable Costs are…

Answer 9

costs which change directly with the number of products made by a business. E.g. stock and materials, utility bills.

Question 10

When total revenue is greater than total costs…

Answer 10

Profit

Question 11

When total costs are greater than total revenue…

Answer 11

Loss

Question 12

What is the equation for profit?

Answer 12

Total Revenue - Total Costs

Question 13

The flow of cash in and out of a business

Answer 13

Cash Flow

Question 14

The cash flowing into a business, its receipts

Answer 14

Inflows

Question 15

The cash flowing out of a business, its payments

Answer 15

Outflows

Question 16

Net Cash Flow

Answer 16

Inflows – Outflows = Net Cash Flow

Question 17

When a business can no longer pay off its debt

Answer 17

Insolvency

Question 18

Cash Flow Forecast

Answer 18

A prediction of how cash will flow through a business in a period of time in future

Question 19

The amount of money in a business at the start of the month

Answer 19

Opening Balance

Question 20

The amount of money in a business at the end of the month

Answer 20

Closing Balance

Question 21

Trade Credit

Answer 21

Where a supplier gives a customer a period of time to pay a bill for goods or services once they have been delivered

Question 22

Stocks

Answer 22

Materials that a business holds

Question 23

Long term finance

Answer 23

Sources of money for businesses that are borrowed or invested typically for more than a year e.g Mortgage, Venture Capitalist

Question 24

Short term fianance

Answer 24

Sources of money that is fairly easy to pay and doesnt require long to receive

Question 25

Money that has been set aside and not spent by individuals and households.

Answer 25

Personal Savings

Question 26

Share Capital

Answer 26

The monetary value of a company Share Capital which belongs to its shareholders, for example, if five people each invest £10,000 into a business, the share capital will be £50,000

Question 27

Shareholders

Answer 27

The owners of a business

Question 28

Venture Capitalist

Answer 28

An individual or company which buys shares in what they hope will be a fast growing company with a long term view of selling the shares at a profit.

Question 29

What is a loan?

Answer 29

Borrowing a sum of money which has to be repaid with interest over a period of time, such as 1-5 years.

Question 30

What is a mortgage?

Answer 30

A loan where property is used as security.

Question 31

A share of the profits of a company received by shareholders who own shares.

Answer 31

Dividend

Question 32

Retained Profit

Answer 32

Profit which is kept back in the business and used to pay for investment in the business.

Question 33

Leasing

Answer 33

Renting equipment or premises.

Question 34

Factoring

Answer 34

A source of finance where a business is able to receive cash immediately for the invoices it has issued from a factor, such as a bank, instead of waiting the typical 30 days to be paid.