Accounting Basics Quiz

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Questions and Answers

What does Total Revenue (TR) reflect for a business?

The difference between assets and liabilities

The earnings from goods sold and services provided (correct)

The cash reserves at the end of a fiscal period

The total costs incurred during production

Which of the following is NOT considered a current asset?

Machinery (correct)

Cash

Debtors

Inventory

What does the abbreviation TFC stand for?

Total Financial Cost

Total Fixed Cost (correct)

Total Fixed Contribution

Total Financial Contribution

Which formula correctly represents Total Cost (TC)?

TC = TFC + TVC Signup and view all the answers

Dividends are paid from which type of earnings?

Net profit after interest and tax Signup and view all the answers

What role do creditors play in a business?

They supply goods or services on trade credit Signup and view all the answers

Which of the following is classified as an intangible asset?

Copyrights Signup and view all the answers

What does equity represent in a business?

The owner's stake or value of the business Signup and view all the answers

What is a patent?

A legal right to exploit an invention for commercial purposes Signup and view all the answers

What does retained profit refer to?

Earnings after costs and dividends have been paid Signup and view all the answers

What is shown on the profit and loss account?

Sales revenue generated from selling goods and services Signup and view all the answers

What does the acid ratio test measure?

An organization’s ability to pay its short-term debts without selling stock Signup and view all the answers

What does profit before interest and taxes represent?

The profit earned before paying taxes and interest Signup and view all the answers

Which calculation determines working capital?

Current liabilities subtracted from current assets Signup and view all the answers

What are raw materials in the context of production?

Natural resources used to create products Signup and view all the answers

What does window dressing in accounting involve?

Legally manipulating financial statements for better presentation Signup and view all the answers

What is a short-term loan?

A loan that needs to be repaid within 12 months Signup and view all the answers

Which of the following best describes liquidity?

The ability to convert assets into cash without a market loss Signup and view all the answers

What is meant by total liabilities?

The total value owed by the business, including current and non-current liabilities Signup and view all the answers

What is capital employed in a business?

The sum of non-current assets and equity finance used for operations Signup and view all the answers

What defines a trademark?

An exclusive right to a registered brand or logo Signup and view all the answers

Which ratio indicates a company’s ability to manage its direct costs of production?

Gross Profit Margin Signup and view all the answers

What does ratio analysis primarily evaluate?

The financial performance through quantitative analysis of various ratios Signup and view all the answers

Which of the following ratios examines a business's ability to pay its short-term liabilities?

Current Ratio Signup and view all the answers

What does ROCE measure in a business?

A firm's efficiency and profitability related to its size Signup and view all the answers

Which of the following best defines bad debt?

A debtor's failure to pay outstanding invoices Signup and view all the answers

What does cash flow forecasting help a business to predict?

How cash is likely to flow in and out over a specific period Signup and view all the answers

What constitutes cash inflow for a business?

Money coming from sales and other sources of financing Signup and view all the answers

Which of the following describes current assets?

Assets that can be converted into cash within a year Signup and view all the answers

What does the closing balance in a cash flow forecast represent?

The amount of cash available at the end of a trading period Signup and view all the answers

What is the purpose of credit control in a business?

To monitor and manage debtors effectively Signup and view all the answers

Which of the following best characterizes cash outflows?

Payments made to creditors and for operating expenses Signup and view all the answers

What is the primary purpose of a sale and leaseback strategy in finance?

To divest assets and regain access through a lease agreement Signup and view all the answers

Which of the following best describes share capital?

Finance raised through issuing shares on the stock market Signup and view all the answers

How is average cost calculated?

Average Cost = Total Cost ÷ Quantity of output Signup and view all the answers

What type of finance is primarily used for daily operations of a business?

Short-term finance Signup and view all the answers

Which of the following statements correctly defines indirect costs?

Overhead costs not easily linked to specific outputs Signup and view all the answers

What is the formula to calculate average revenue?

AR = Total Revenue ÷ Quantity of output Signup and view all the answers

Which of the following statements about trade credit is accurate?

It allows purchase of goods without immediate payment Signup and view all the answers

What represents a revenue stream for a business?

Money earned from various income sources like sponsorships and sales Signup and view all the answers

What is the primary focus of product orientation in marketing?

Creating products based on existing manufacturing capabilities Signup and view all the answers

Which term describes goods perceived as high quality but sold at a low price?

Bargain products Signup and view all the answers

What does market segmentation aim to achieve?

To divide a market into smaller, distinct groups Signup and view all the answers

What is meant by sales revenue?

The income generated from selling goods and services Signup and view all the answers

Which characteristic does demographic segmentation use to categorize consumers?

Statistical population characteristics Signup and view all the answers

What is included in a marketing plan?

Marketing objectives and strategies Signup and view all the answers

What distinguishes differentiation in marketing?

Creating a unique selling proposition Signup and view all the answers

How is geographic segmentation defined in marketing?

Characterizing consumers by geographical locations Signup and view all the answers

Study Notes

3.1 Terms

Capital expenditure: Business spending on fixed assets or capital equipment.
Finance: Money available to fund business activities.
Revenue Expenditure: Business spending on everyday and regular operations.

3.2 Terms

Business angels: Wealthy individuals who invest in high-growth ventures.
Crowdfunding: Raising finance from a large number of people, usually online.
External sources of finance: Funds from outside the organization (e.g., banks, business angels, venture capitalists, government).
Initial public offering (IPO): Finance from internal resources and assets without external providers.
Leasing: Financial service enabling businesses to access non-current assets without high capital expenditure costs.

3.3 Terms

Loan capital: Borrowed funds from financial lenders (e.g., commercial banks).
Long-term finance: Funding for more than 5 years, often for assets or business growth.
Microfinance: External finance for entrepreneurs, especially women and those with low incomes, who can't access commercial bank loans.
Microfinance providers: Organizations providing small loans to entrepreneurs.
Overdraft: Banking service allowing customers to withdraw more money than in their account.
Personal funds: Internal finance from entrepreneurs' savings.
Retained profit: Reinvested surplus funds rather than distributed to owners.
Revenue Expenditure: Everyday and regular business spending (e.g., wages, raw materials).
Sales and leaseback: Hybrid strategy involving divesting assets and leasing them back.
Sale of assets: Selling existing assets as a source of finance.
Share capital: Equity capital raised by issuing shares via a stock exchange.
Share issue: Public limited companies selling additional shares to raise finance.
Short-term finance: Funds needed for daily running of the business (e.g., revenue expenditure).
Sources of finance: Different ways a company receives funds (e.g., personal savings, loan capital, crowdfunding, share capital).
Stock exchange: Regulated market for buying and selling shares of public limited companies.
Trade credit: Financial service allowing businesses to delay payment for goods/services.
Average costs: Cost per unit of output (TC/Q).
Average revenue: Amount a business receives from customers (TR/Q, or Price).

3.4 Terms

Assets: Possessions with monetary value (e.g., buildings, land, machinery).
Balance sheet: Statement of financial position of a firm, showing assets, liabilities, and shareholder's investment.
Cash: Money available within the business and in the bank accounts
Copyrights: Intangible assets granting legal rights to creative works.
Cost of sales (COS): Direct production costs (raw materials, component parts, direct labor).
Creditors: Suppliers who allow businesses to purchase on credit.
Current assets: Short-term assets lasting 12 months or less (e.g., cash, debtors, inventory).
Current liabilities: Short-term debts to be repaid within 12 months (e.g., bank overdrafts, accounts payable).
Debtors: Customers who owe money to the business.
Dividends: Payments from company profits to shareholders.
Equity: Value of owners' stake in a firm.
Expenses: Indirect costs of production (e.g., rent, management salaries, marketing campaigns).
Final accounts: Published accounts available to stakeholders (e.g., managers, investors).
Finished goods: Completed products ready for sale.
Fixed assets: Long-term assets (e.g., property, equipment).
Total assets: Sum of current and non-current assets.
Total liabilities: Sum of current and non-current liabilities.
Trade creditors: Suppliers providing credit.
Trademark: Registered brand identifier with exclusive commercial use rights.
Trademark: Involves the visual depiction of a concept or company to establish market dominance.
Window dressing: Manipulating financial statements to make them look more positive.
Work-in-progress: Partially completed goods.
Working capital: Money available for daily operations. (Current assets - Current liabilities)
Total assets: The total sum of current and non-current assets
Total Liabilities: The total sum of current and non-current liabilities
Tax: Compulsory deductions paid to the government from a firm's profit.
Illiquid Assets: These items of value, owned by the business, cannot be sold easily, are difficult to sell, and/or cannot be sold without incurring a significant loss in value.
Intangible Assets: Non-physical fixed assets that are valuable to firms' survival and success (e.g., brand name, goodwill).
Intellectual property rights (IPRs): A firm's fixed, intangible assets with monetary value. (e.g., patents, copyrights, and trademarks).
Liabilities: Debts owed to others (e.g., money owed to financiers).
Net assets: Value of an organization's assets after deducting liabilities.

4.1 Terms

Market Growth: Increase in market size, measured by sales revenue rise.
Market leader: Company with the largest market share in an industry.
Market orientation: Marketing approach focusing on meeting customer needs.
Market share: Firm's sales revenue as a percentage of the total industry sales.
Market size: Total number of customers or the total value of sales in a market.

4.2 Terms

Bargain products: High-quality goods sold at low prices.
Consumer profiles: Demographic and psychographic characteristics of consumers.
Cowboy products: Low-quality goods sold at high prices.
Demographic segmentation: Dividing customers based on population characteristics (e.g., age, gender).

4.3 Terms

Differentiation: Distinguishing a company's products from competitors.
Economy brands: Low quality, low-priced goods and services.
Geographic segmentation: Dividing the market based on location.
Market: Collective term for buyers and sellers of a product/service.
Market segment: Distinct group of customers with common characteristics.
Market segmentation: Dividing a market into smaller segments to meet specific needs.
Marketing mix: Key elements of a successful marketing strategy (product, price, promotion, place).
Marketing objectives: Goals and targets for marketing efforts.
Marketing plan: Document outlining marketing objectives and strategies.
Marketing planning: Structured process of developing marketing objectives & strategies.
Marketing strategies: Long-term actions to achieve marketing goals.

4.4 Terms

Focus groups: Small discussion groups to gain insights into attitudes and behaviours.
Government publications: Official documents representing secondary market research.
Interviews: Primary research method involving discussions to gather information.
Market analysis: Secondary market research analyzing trends and characteristics of a market.
Market research: Discovering opinions, beliefs, and preferences of customers.
Media articles: Secondary market research using articles from various media.
Observations: Primary research method involving watching how people behave.
Online secondary market research: Internet-based data sources for market research.

4.5 Terms

Above the line promotion (ATL): Paid-for promotions via independent media.
Advertising: Informative and persuasive marketing communication.
After-sales care: Value-added services after the sale (e.g., warranties, maintenance).
Agents: Intermediaries who sell products on commission.
Below the line promotion (BTL): Promotion that doesn't involve external media agents.
Brand: Registered name/logo associated with a specific product/business.
Brand awareness: Level of customer recognition for a brand.
Brand development: Part of a firm's marketing strategy communicating the value of a brand.
Brand royalty: Degree of customer loyalty to a particular brand.
Brand switching: Consumer shifting from one brand to another.
Brand value: Brand's potential for future earnings.

4.6 Terms

Branding: Creating a distinctive name/logo for products.
Competitive pricing: Pricing products similar to competitors' products.
Consumer goods: Goods bought for personal consumption (e.g., household items).
Customer care: Attentiveness from employees in meeting customer needs.
Customer loyalty schemes: Rewards/incentives to retain repeat customers
Direct mail: Using postal mail for promotional communication.
Distribution (place): Getting products to customers at the right time and place.
Distribution channel: Path for a product to reach the consumer.
Extension strategies: Marketing approaches used to prolong a product in the market
Genericized brands: Brand names that become synonymous with a product (e.g. Band-Aid).

4.7 Terms

Global brands: Highly recognized brands in international markets.
Impulse buying: Unplanned purchases due to attractive promotions.
Informative promotion: Informing customers about products.
Innovators: Customers who are the first to purchase new products.
Intermediaries: Third-party distributors (e.g., agents, wholesalers).
Intermediation: Marketing use of intermediaries between producers and customers.
Logo: Visual symbol representing a business or product
Loss leader pricing: Selling a product at a low price to draw in customers for other products.
Mail order marketing: Form of distribution using postal services.
Mark-up (profit margin): Difference between selling price and cost per unit.
Merchandise: Goods that are available for sale
Multi-brand strategy: Business using multiple brands for their overall product strategy.
Payment methods: Different ways customers can pay for products/services.
Penetration pricing: Low initial prices to gain market entry, followed by price increases.

4.8 Terms

Personal selling: Face-to-face sales interactions by employees.
Persuasive promotion: Marketing efforts encouraging purchases and building loyalty
Point of sale (POS): Location retail stores where products are physically available for customers.
Predatory pricing: Setting very low prices to harm competitior sales.
Premium pricing: Selling high-price products for quality or prestige.
Price: Monetary value of goods & services.
Price leadership: Following the price of the leading company.
Price wars: Setting very low prices to win market share causing competition.

4.9 Terms

Pricing methods: Various ways companies set prices, paid by customers.
Process: Ways to deliver a service or product to consumers
Producer goods: Products purchased by businesses for internal use.
Product differentiation: Strategies for making products unlike competitors.
Product life cycle (PLC): Stages of a product's development within the market.
Product portfolio: Complete range and mix of brands/products from a firm.

4.10 Terms

Promotional mix: Variety of strategies used to promote products, above & below the line.
Prototype: Trial product used in the pre-launch stages.
Public relations: Managing public perception and understanding of a business.
Retailers: Businesses selling products/services directly to consumers.
Sales promotion: Short-term strategies used to attract customers.

4.11 Terms

Services: Non-physical products offered by businesses.
Slogans: Catchphrases representing brands/products.
Social media marketing (SMM): Online strategies to create favorable brand impressions.
Social networking: Use of online platforms for sharing content related to brands.
Sponsorship: Promoting businesses that give financial support to other ventures.

4.12 Terms

Profit and loss account Structure: Financial statement measuring a company's profit or loss.
Revenue: Income generated from sales
Cost of goods sold (COGS): Costs directly related to producing goods sold.
Gross Profit: Profit after deducting COGS.
Expenses: Overall operating costs.
Net Profit Before Interest and Tax (EBIT): Profit after COGS, expenses and before paying interest or taxes
Net Profit After Tax (EAT): Profit after paying all taxes
Retained Profit: Profits kept by the company.
Cash flow forecast: Projected inflows and outflows of cash to a business
Break-even analysis: Identifying the point where total revenues equal total costs.

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Description

Test your knowledge on fundamental accounting concepts with this quiz. Explore topics such as total revenue, current assets, and equity. Determine your understanding of essential financial terms and their implications in business.