Business Finance and Objectives Quiz
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Questions and Answers

What is the total cost of the loan?

  • €79.96
  • €10,079.96 (correct)
  • €179.04
  • €10,000

What is the break-even point?

  • The point where total cost equals initial investment
  • The point where total revenue equals variable cost
  • The point where total revenue equals total cost (correct)
  • The point where total cost equals fixed cost

What are fixed costs?

  • Costs that vary with the amount of goods produced
  • Costs associated with producing or selling goods
  • Costs that remain constant regardless of production levels (correct)
  • Costs related to the initial investment in equipment and machinery (correct)

What is the formula for calculating total cost?

<p>Fixed Costs + Variable Costs (C)</p> Signup and view all the answers

What could be considered a variable cost?

<p>Cost of raw materials used in production (C)</p> Signup and view all the answers

What does the 'S' in SMART objectives stand for?

<p>Specific (A)</p> Signup and view all the answers

Which of the following is a financial objective for a startup business?

<p>Market Share (D)</p> Signup and view all the answers

What is the primary focus of a startup's survival objective in its first year?

<p>Building a customer base (B)</p> Signup and view all the answers

Which aspect is NOT a characteristic of financial objectives?

<p>Personal achievement (A)</p> Signup and view all the answers

Which of the following is an example of a non-financial objective?

<p>Social objectives (A)</p> Signup and view all the answers

What is the main objective of a business?

<p>To achieve profit (B)</p> Signup and view all the answers

How is gross profit calculated?

<p>Revenue - Cost of goods sold (B)</p> Signup and view all the answers

What is the correct formula for net profit?

<p>Gross profit - Expenses (A)</p> Signup and view all the answers

In the provided example, what is the calculated net profit?

<p>£12000 (B)</p> Signup and view all the answers

What does total cost refer to in a business?

<p>The overall sum of all costs, both fixed and variable (C)</p> Signup and view all the answers

What is one primary motivation for a business to increase its market share?

<p>Taking sales away from competitors (D)</p> Signup and view all the answers

What could be a financial challenge for entrepreneurs when starting a new business?

<p>Generating sufficient revenue to cover expenses (D)</p> Signup and view all the answers

Which of the following best describes social enterprises?

<p>Enterprises that operate for social or environmental purposes (A)</p> Signup and view all the answers

What might drive an entrepreneur to seek control over their working life?

<p>Desire to escape the typical 9-5 job structure (D)</p> Signup and view all the answers

What non-financial motivation could an entrepreneur experience when starting a business?

<p>Personal satisfaction and pride in their work (D)</p> Signup and view all the answers

What is the formula for calculating revenue?

<p>Revenue = Price × Quantity Sold (B)</p> Signup and view all the answers

Which of the following describes fixed costs?

<p>Costs that include factory rent and salaries (B)</p> Signup and view all the answers

What is a primary objective of private sector businesses?

<p>Maximizing profits (C)</p> Signup and view all the answers

Which of these entities is a public sector organization?

<p>A state school (D)</p> Signup and view all the answers

What does cash flow primarily represent in a business?

<p>The budget for cash inflows and outflows. (D)</p> Signup and view all the answers

How do variable costs change in a business?

<p>They increase with higher production levels (B)</p> Signup and view all the answers

Which of the following is considered a cash inflow?

<p>Arranging discounts and promotions. (A)</p> Signup and view all the answers

What is the closing balance in cash flow forecasting?

<p>The cash available at the end of the month. (D)</p> Signup and view all the answers

Which method can help improve cash flow in a business?

<p>Reducing waste. (B)</p> Signup and view all the answers

Which of the following is NOT a use of cash flow forecasts?

<p>Calculating long-term investments. (B)</p> Signup and view all the answers

What may happen if a supplier is not paid on time?

<p>They may refuse to deal with the company in the future. (C)</p> Signup and view all the answers

Which of the following is classified as overhead?

<p>Utility bills for the business. (A)</p> Signup and view all the answers

What might occur if employees are not paid on time?

<p>Employees may leave, incurring recruitment costs. (A)</p> Signup and view all the answers

What does 'Cash is King' signify in business operations?

<p>Cash is critical for meeting obligations and preventing insolvency. (D)</p> Signup and view all the answers

What is the formula for calculating profit?

<p>Profit = Total Revenue - Total Costs (A)</p> Signup and view all the answers

What is the variable cost per unit?

<p>120 (A)</p> Signup and view all the answers

What is the break-even point for this product?

<p>150 units (D)</p> Signup and view all the answers

If the business sells 250 units, what is the total revenue?

<p>45000 (A)</p> Signup and view all the answers

What is the margin of safety if the business sells 300 units?

<p>150 units (C)</p> Signup and view all the answers

What does the margin of safety indicate?

<p>The amount of sales the business can lose before making a loss (A)</p> Signup and view all the answers

What is a primary advantage of trade credit for businesses?

<p>Businesses can sell products before paying suppliers. (A)</p> Signup and view all the answers

What is a significant disadvantage of using personal savings for financing a business?

<p>Opportunity cost of not using money for personal expenses. (D)</p> Signup and view all the answers

What is a disadvantage of seeking venture capital?

<p>Loss of some control over the business. (C)</p> Signup and view all the answers

Which of the following describes a risk when businesses first request trade credit?

<p>Suppliers may deny their request for credit. (A)</p> Signup and view all the answers

What benefit does venture capital provide to a business?

<p>Knowledge and growth strategies to expand the business. (B)</p> Signup and view all the answers

What is an advantage of an overdraft?

<p>It allows businesses to borrow money quickly and flexibly. (A)</p> Signup and view all the answers

When is an overdraft NOT a good financing option?

<p>When a business has a long-term need for capital. (D)</p> Signup and view all the answers

What happens when a business exceeds its overdraft limit?

<p>The business incurs high charges and penalties for unauthorized overdrafts. (B)</p> Signup and view all the answers

Which of the following is NOT a disadvantage of overdrafts?

<p>Overdrafts require collateral or security. (A)</p> Signup and view all the answers

What is a key factor to consider when using an overdraft?

<p>The ability to manage and repay the overdraft efficiently. (D)</p> Signup and view all the answers

Flashcards

Business Aims

Strategic goals of a business, like growth or expansion.

Business Objectives

Specific steps to achieve a business aim, often measured and time-bound.

Survival (Financial Objective)

The ability for a startup business to stay in operation during its initial period.

Profit (Financial Objective)

Total revenue minus total cost, a key measure of a business's success.

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Sales (Financial Objective)

The amount of goods or services sold by a business, often used to gauge growth.

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Market Share Increase (Motivation)

A business's goal to increase its portion of the total sales within the market.

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Financial Security (Motivation)

The desire for financial stability and security, often leading to starting a business.

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Revenue

Money that a business receives from selling goods or services.

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Non-Financial Motivations

Motivations that don't directly involve money, like the satisfaction of creating something new.

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Social Enterprises

Businesses that aim to make a positive social or environmental impact while also making a profit.

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Fixed Costs

Costs that stay the same regardless of how much a business produces or sells, like rent.

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Variable Costs

Costs that increase as a business produces more goods or services, like the cost of materials.

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Independence (Challenge)

The desire to be your own boss and make decisions independently.

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Public Sector Businesses

Organizations owned by the government, like the BBC or the Met Office, that focus on public benefit.

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Private Sector Businesses

Businesses owned by private investors, like manufacturers or banks, with aims like profit maximization.

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Cost of Goods Sold (COGS)

The direct costs involved in producing goods or services, like raw materials and labor.

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Gross Profit

The difference between revenue and the cost of goods sold. It reflects how much money is left to cover other expenses.

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Net Profit

The profit remaining after all expenses are deducted from gross profit. It shows the true profitability of a business.

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Total Cost

The total cost of running a business, including both fixed and variable costs.

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Break-even Point

The point at which total revenue equals total cost; the business neither makes a profit nor incurs a loss.

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Profit

The difference between a business's total revenue and total costs (fixed and variable).

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Cash Flow Forecast

A prediction of a business's cash inflows and outflows over a period of time.

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Cash Inflow

Money coming into a business, often from sales.

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Cash Outflow

Money leaving a business, often for expenses like rent or supplies.

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Opening Balance

The amount of money available at the start of a period.

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Closing Balance

The amount of money available at the end of a period.

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Margin of Safety

The amount of sales a business can lose before making a loss. It represents the 'wiggle room' or buffer before profit turns into loss.

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Break-Even Analysis

A mathematical calculation that shows the relationship between different factors contributing to a business's financial results. It helps businesses understand profit potential and make informed decisions.

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What are overheads?

Expenses necessary for a business to operate, but not directly involved in making goods or services. Examples include rent, utilities, and insurance.

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What is cash flow?

The money a business has available to pay its bills. It's essential for smooth operations and preventing financial troubles.

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Why is cash management important?

Ensuring payments are received on time from customers to cover costs. This is crucial for a business's survival and financial stability.

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What is profit?

The difference between a business's total income (revenue) and total expenses (costs). When revenue is higher than costs, a business makes a profit.

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What is break-even point?

The point at which a business's total revenue exactly matches its total costs. There is no profit or loss.

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Overdraft

A short-term financing option where a business can temporarily borrow money from its bank account, exceeding its balance. This allows for flexibility in managing cash flow.

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When are overdrafts helpful?

Overdrafts are useful for handling short-term cash flow problems like unexpected expenses or delays in receiving payments.

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When are overdrafts NOT helpful?

Overdrafts are not suitable for funding ongoing business activities or long-term investments.

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What is the cost of overdraft flexibility?

The interest rates on overdrafts are usually higher than other loan types due to their flexibility and short-term nature.

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What are the potential risks of overdrafts?

Banks can demand immediate repayment of overdrafts if they deem the business's financial situation risky, or if the overdraft limit is exceeded.

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What is Trade Credit?

Getting goods from suppliers but paying later, allowing businesses to sell products before financing them. This is a short-term source of finance that can help businesses avoid raising capital upfront.

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What is Venture Capital?

A type of investment where capitalists provide funds for businesses with high growth potential in exchange for partial ownership and a share of the profits.

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What is the Opportunity Cost of Personal Savings for a Business?

The opportunity cost of using personal savings for a business is the potential profit you might have earned from investing that money elsewhere. This can be a significant drawback, as it might limit your options for other expenditures.

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Why is Venture Capital Helpful for Businesses?

Venture capitalists can bring in-depth knowledge, industry connections, and growth strategies, which can be invaluable for businesses seeking to expand quickly and effectively. This involvement can provide a significant advantage to new ventures.

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What is a Potential Drawback of Using Venture Capital?

While venture capitalists can offer valuable expertise and resources, they often demand substantial control and a large portion of profits in return for their investment. This can lead to a loss of control over business decisions for the original owners.

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