Topic 2 business spec

Question 1

Internal finance

Answer 1

a) Owner’s capital: personal savings
b) Retained profit
c) Sale of assets

Question 2

External finance

Answer 2

o family and friends
o banks
o peer-to-peer funding
o business angels
o crowd funding
o other businesses
b) Methods of finance:
o loans
o share capital
o venture capital
o overdrafts
o leasing
o trade credit
o grants

Question 3

Factors affecting sales forecasts

Answer 3

o consumer trends
o economic variables
o actions of competitors

Question 4

Contribution

Answer 4

selling price – variable cost per unit

Question 5

Break-even point

Answer 5

total fixed costs + total variable costs = total
revenue

Question 6

Types of budget:

Answer 6

o historical figures
o zero based

Question 7

Profit

Answer 7

o gross profit
o operating profit
o profit for the year

Question 8

Statement of comprehensive income (profit and loss
account)

Answer 8

o measuring profitability:
- calculation of gross profit margin, operating profit
margin, and profit for the year (net profit) margin
o ways to improve profitability

Question 9

Statement of financial position (balance sheet):

Answer 9

o measuring liquidity:
- calculating current ratio and acid test ratio
o ways to improve liquidity

Question 10

Internal and external causes of business failure

Answer 10

o financial factors
o non-financial factors

Question 11

Methods of production:

Answer 11

o job
o batch
o flow
o cell

Question 12

Productivity

Answer 12

output per unit of input per time period

Question 13

Efficiency

Answer 13

production at minimum average cost

Question 14

Capacity utilisation

Answer 14

current output (divided by) maximum possible output
(x 100)

Question 15

Quality
management

Answer 15

o control
o assurance
o circles
o Total Quality Management (TQM)
b) Continuous improvement (Kaizen)

Question 16

Stock control

Answer 16

a) Interpretation of stock control diagram
b) Buffer stocks
c) Implications of poor stock control
d) Just in time (JIT) management of stock
e) Waste minimisation
f) Competitive advantage from lean production

Question 17

Economic influences

Answer 17

o inflation (the rate of inflation, the Consumer Prices
Index)
o exchange rates (appreciation, depreciation)
o interest rates
o taxation and government spending
o the business cycle

Question 18

Legislation

Answer 18

o consumer protection
o employee protection
o environmental protection
o competition policy
o health and safety