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Questions and Answers
What is the primary objective of financial management in a business?
Which type of income is generated from non-core business activities?
What is the primary purpose of cash flow management?
What type of expenditure remains the same even if the business produces more or less?
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What is the term for the income generated from the sale of goods and services?
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What is the term for reports that provide information about a company's financial performance and position?
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Study Notes
Business Overview
- A business is an organization that operates to provide goods and services to customers in exchange for revenue.
- Businesses can be classified into different types, such as:
- Sole proprietorship
- Partnership
- Corporation
- Limited liability company (LLC)
Finance
- Financial Management: The process of planning, organizing, and controlling financial resources to achieve business objectives.
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Financial Statements: Reports that provide information about a company's financial performance and position, including:
- Balance Sheet
- Income Statement (Profit and Loss Statement)
- Cash Flow Statement
Income
- Revenue: The income generated from the sale of goods and services.
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Types of Income:
- Operating Income: Revenue generated from core business operations.
- Non-Operating Income: Revenue generated from non-core business activities, such as investments.
Expenditure
- Expenses: The costs incurred by a business to generate revenue.
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Types of Expenditure:
- Fixed Expenses: Costs that remain the same even if the business produces more or less, such as rent and salaries.
- Variable Expenses: Costs that vary depending on the level of production, such as raw materials and labor.
Cash Flow
- Cash Flow: The movement of money into or out of a business.
- Cash Flow Management: The process of managing cash inflows and outflows to ensure the business has sufficient liquidity to meet its financial obligations.
Profitability
- Profit: The difference between revenue and total expenses.
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Profitability Ratios: Measures used to evaluate a company's ability to generate earnings, such as:
- Gross Profit Margin
- Operating Profit Margin
- Net Profit Margin
Other Key Concepts
- Assets: Resources owned or controlled by a business, such as cash, inventory, and property.
- Liabilities: Debts or obligations that a business must pay or settle, such as loans and accounts payable.
- Stakeholders: Individuals or groups with an interest in the business, such as shareholders, customers, and employees.
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Description
Test your knowledge of business basics, including types of businesses, financial management, income, expenditure, cash flow, profitability, and more!
