theme 2 chat BEST ONES

Question 1

What are the three main internal sources of finance?

Answer 1

Owner’s capital, retained profit, and sale of assets.

Question 2

Give one advantage and one disadvantage of using retained profit.

Answer 2

Advantage: No interest or repayment required.

Disadvantage: Limited availability and may reduce reinvestment options.

Question 3

Name two short-term external sources of finance.

Answer 3

Overdrafts and trade credit.

Question 4

Name three long-term external sources of finance.

Answer 4

Bank loans, share capital, and venture capital.

Question 5

What is crowdfunding?

Answer 5

Raising small amounts of capital from a large number of people, usually online.

Question 6

What is the difference between limited and unlimited liability?

Answer 6

Limited liability protects personal assets; unlimited liability means personal assets are at risk if the business fails.

Question 7

Why is a business plan important when raising finance?

Answer 7

It outlines strategy and forecasts, helping convince lenders/investors of viability.

Question 8

What are the contents of a typical business plan?

Answer 8

Executive summary, business objectives, financial forecasts, market research, marketing strategy, operations, personnel.

Question 9

What is sales forecasting?

Answer 9

Predicting future sales based on historical data and market trends.

Question 10

Name three factors that affect the accuracy of sales forecasting.

Answer 10

Consumer trends, economic variables, and competitor actions.

Question 11

State the formula for sales revenue.

Answer 11

Sales Revenue = Sales Volume × Selling Price

Question 12

State the formula for total costs.

Answer 12

Total Costs = Fixed Costs + Variable Costs

Question 13

What is break-even output?

Answer 13

The number of units a business must sell to cover total costs.

Question 14

State the formula for break-even output.

Answer 14

Break-even Output = Fixed Costs / (Selling Price – Variable Cost per Unit)

Question 15

What is the margin of safety?

Answer 15

The number of units sold above the break-even point.

Question 16

State the formula for margin of safety.

Answer 16

Margin of Safety = Actual Output – Break-even Output

Question 17

What are the three types of budgets?

Answer 17

Income budget, expenditure budget, and profit budget.

Question 18

What is variance analysis?

Answer 18

Comparing budgeted figures with actual results.

Question 19

Define favourable and adverse variance.

Answer 19

Favourable: Actual performance better than budgeted.

Adverse: Actual performance worse than budgeted.

Question 20

What is the difference between profit and cash flow?

Answer 20

Profit is revenue minus costs; cash flow is the movement of money in and out.

Question 21

State the formula for gross profit.

Answer 21

Gross Profit = Revenue – Cost of Sales

Question 22

State the formula for operating profit.

Answer 22

Operating Profit = Gross Profit – Operating Expenses

Question 23

State the formula for profit for the year (net profit).

Answer 23

Profit for the Year = Operating Profit – Interest – Tax

Question 24

State the formula for gross profit margin.

Answer 24

(Gross Profit / Revenue) × 100

Question 25

State the formula for operating profit margin.

Answer 25

(Operating Profit / Revenue) × 100

Question 26

State the formula for net profit margin.

Answer 26

(Net Profit / Revenue) × 100

Question 27

List three ways a business can improve profitability.

Answer 27

Increase prices, reduce costs, improve efficiency.

Question 28

What is liquidity?

Answer 28

The ability of a business to meet short-term financial obligations.

Question 29

State the formula for current ratio.

Answer 29

Current Ratio = Current Assets / Current Liabilities

Question 30

State the formula for acid test ratio.

Answer 30

Acid Test Ratio = (Current Assets – Inventory) / Current Liabilities

Question 31

What is a healthy current ratio and acid test ratio?

Answer 31

Current: around 1.5:1; Acid test: around 1:1

Question 32

Give two internal and two external causes of business failure.

Answer 32

Internal: poor cash flow, lack of planning. ## Footnote External: recession, increased competition.

Question 33

Name four methods of production.

Answer 33

Job, batch, flow, and cell production.

Question 34

What is productivity?

Answer 34

Output per unit of input over a given time.

Question 35

What is efficiency in production?

Answer 35

Producing at the lowest cost without reducing quality.

Question 36

What is the difference between labour-intensive and capital-intensive production?

Answer 36

Labour-intensive relies on human labour; capital-intensive uses more machinery.

Question 37

State the formula for capacity utilisation.

Answer 37

Capacity Utilisation (%) = (Actual Output / Maximum Output) × 100

Question 38

Give one reason for under-utilisation and one for over-utilisation.

Answer 38

Under: lack of demand. ## Footnote Over: demand exceeding capacity.

Question 39

Name three ways to improve capacity utilisation.

Answer 39

Increase sales, subcontract work, reduce max capacity.

Question 40

What is buffer stock?

Answer 40

Minimum level of stock kept to prevent stockouts.

Question 41

What is lead time?

Answer 41

Time between ordering stock and receiving it.

Question 42

What is just-in-time (JIT) stock control?

Answer 42

Stock arrives exactly when needed in the production process.

Question 43

Give one advantage and one disadvantage of JIT.

Answer 43

Advantage: reduces storage costs. ## Footnote Disadvantage: high risk of stockouts.

Question 44

What is lean production?

Answer 44

Maximising output while minimising waste.

Question 45

What is Kaizen?

Answer 45

Continuous improvement involving all employees.

Question 46

What is quality control?

Answer 46

Checking finished products for faults.

Question 47

What is quality assurance?

Answer 47

Ensuring quality throughout the production process.

Question 48

What is total quality management (TQM)?

Answer 48

A whole-business approach focused on quality and customer satisfaction.