Unit 6 Finance (mock)

Question 1

Government grants

Answer 1

Often given to new or small firms. They don’t have to be repaid

Question 2

Trade credit

Answer 2

Businesses may give a small business one or to months to pay back for the stock they have bought

Question 3

Overdraft

Answer 3

Banks allow you to spend more money than you have in your current account

Question 4

Loan/mortgage

Answer 4

A fixed amount of money lent for a fixed amount of time with interest charged by the bank

Question 5

Family and friends

Answer 5

When people known by the business lend it money

Question 6

Retained profit

Answer 6

What is left of sales revenue after all expenses have been paid, including tax and dividends

Question 7

Issuing shares

Answer 7

When a limited company sells shares

Question 8

Selling unwanted assets

Answer 8

Selling items such as old machines or vehicles that are no longer needed

Question 9

Hire purchase

Answer 9

when a business can rent an asset for a period, and after that time they own it

Question 10

Factors to consider when choosing how to finance your business (5)

Answer 10

• how much you need
• how quick you can pay back
• whether your business is already operating or a startup
• whether you are a sole trader/partnership/plc/ltd
• if you want to obtain complete control over the business

Question 11

Family and friends (internal or external)

Answer 11

Internal

Question 12

Retained profit (internal or external)

Answer 12

Internal

Question 13

Share issue (internal or external)

Answer 13

External

Question 14

Loan (internal or external)

Answer 14

External

Question 15

Mortgage (internal or external)

Answer 15

External

Question 16

Selling unwanted assets (internal or external)

Answer 16

Internal

Question 17

Overdraft (internal or external)

Answer 17

External

Question 18

Trade credit (internal or external)

Answer 18

External

Question 19

Trade credit (internal or external)

Answer 19

External

Question 20

Hire purchase (internal or external)

Answer 20

External

Question 21

Government grants (internal or external)

Answer 21

External

Question 22

Inflow

Answer 22

Money that goes into your account

Question 23

Outflow

Answer 23

Money that goes out of your account

Question 24

Opening balance

Answer 24

The amount of money you start with at the start of the month

Question 25

Closing balance

Answer 25

The amount of money you Finnish with at the end of the month

Question 26

Cash flow forecast

Answer 26

A forecast of all the expected future income and outgoings from an account over a period of usually a year

Question 27

Cash flow statement

Answer 27

A record of past income and outgoings from an account over a period of usually a year

Question 28

Ways to improve cash flow

Answer 28

Reduce outflows and increase inflows

Question 29

Equation for profit

Answer 29

Profit= total revenue - total costs

Question 30

Breakeven

Answer 30

When a business makes neither a profit nor loss

Question 31

Advantages of break even (3)

Answer 31

- Allows managers to see the effects of a change in costs - shows managers the effect of a change in price - producing break even charts helps to persuade investors that you have planned how to make your business successful

Question 32

Disadvantages of break even

Answer 32

- assumes that the business sell all the products it produces - prices and costs can change rapidly in some markets, so the break even charts become out of date quickly.

Question 33

Price

Answer 33

The amount a business asked a customer to pay for a single product

Question 34

Sales

Answer 34

The number of products sold by a business over some time period

Question 35

Costs

Answer 35

Spending that is necessary to set up and run the business

Question 36

Fixed costs

Answer 36

Costs that do not vary with outflow e.g. rent

Question 37

Variable costs

Answer 37

Costs that can change