Business Funding and Forecasting Overview
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Questions and Answers

Which statement correctly defines cash inflows?

  • Money that is spent on business expenses like rent and salaries.
  • The balance remaining after deducting monthly expenses from revenues.
  • Net revenue minus the total liabilities of the business.
  • Money coming into the business from various sources such as sales and loans. (correct)

    • What represents the closing balance in accounting?

  • The cash available at the end of the month after accounting for all inflows and outflows. (correct)
  • Estimated profits from sales yet to be received.
  • Money allocated for future expenses that have yet to occur.
  • The total liabilities owed by the business at the end of the month.

    • Which term best describes expenses that are paid after the related period has ended?

  • Closing balance
  • Net cash flow
  • Accrual (correct)
  • Prepayment

    • What is included in non-current assets?

    <p>Premises and fixtures &amp; fittings.</p> Signup and view all the answers

    Which best describes liquidity?

    <p>The ability of a firm to meet short-term cash obligations.</p> Signup and view all the answers

    What is a defining characteristic of crowdfunding?

    <p>It attracts investment from a large number of speculative investors.</p> Signup and view all the answers

    How does hire purchase differ from leasing?

    <p>In hire purchase, ownership transfers to the buyer after the final payment.</p> Signup and view all the answers

    What does a break-even point represent for a business?

    <p>The point where total revenue equals total costs.</p> Signup and view all the answers

    Which of the following best describes variable costs?

    <p>Costs that fluctuate with the level of output.</p> Signup and view all the answers

    What is the primary purpose of a cash flow forecast?

    <p>To predict cash inflows and outflows of a business.</p> Signup and view all the answers

    What distinguishes trade credit from other forms of financing?

    <p>It allows customers to purchase now and pay later.</p> Signup and view all the answers

    Which factor does not contribute to total costs?

    <p>Selling price per unit.</p> Signup and view all the answers

    What is the likely outcome of invoice discounting for a business?

    <p>It provides immediate cash flow by selling debts at a reduction.</p> Signup and view all the answers

    Study Notes

    Funding Sources for Businesses

    • Crowdfunding: Attracting investment from many small investors.
    • Mortgages: Long-term loans secured against a specific asset (e.g., building).
    • Venture Capital: Investment from experienced entrepreneurs in exchange for a stake in the business.
    • Debt Factoring: Selling a business's debts to receive immediate cash.
    • Hire Purchase: Paying for an asset in installments.
    • Leasing: Paying to use an asset, but not owning it.
    • Trade Credit: Suppliers providing a payment period for purchases.
    • Grants: Lump-sum funding from governments or organizations.
    • Donations: Voluntary financial contributions to a charity or enterprise.
    • Peer-to-Peer Lending: Loans between individuals.
    • Invoice Discounting: Offering discounts for prompt payment of invoices.

    Financial Forecasting and Analysis

    • Break-Even Analysis: The point where total revenue equals total costs.
    • Variable Costs: Costs changing with production ("output").
    • Semi-Variable Costs: Partly fixed, partly variable, depending on business activity (e.g., overtime).
    • Fixed Costs: Costs not changing with production.
    • Total Costs: Fixed costs + Variable costs.
    • Total Revenue: Total sales income.
    • Total Revenue Calculation: Selling price x Quantity Sold.
    • Total Sales: Total sales in a period (e.g., yearly). Expressed in value (money) or volume (quantity).
    • Selling Price per Unit: The price for each item.
    • Sales Volume (Units): Sales expressed in quantity.
    • Cash Flow Forecasting: Predicting cash inflows and outflows. Essential for business survival.
    • Cash Inflows/Receipts: Money coming into a business.
    • Cash Outflows/Payments: Money leaving a business.
    • Opening Balance: Cash available at the start of a period.
    • Closing Balance: Cash available at the end of a period. Calculated as Opening Balance + Net Cash Flow
    • Liquidity: Measures a firm's ability to meet short-term cash obligations.

    Financial Statements

    • Statement of Comprehensive Income (SOCI): Shows a company's trading position. Calculates gross profit and then net profit or loss.
    • Accrual: An expense recorded in a period after it's incurred.
    • Prepayment: An expense paid before the period to which it relates.
    • Statement of Financial Position (SOFP): Summarizes a company's assets and liabilities at a specific point in time (usually year-end).
    • Non-Current Assets: Items owned for more than one year (e.g., buildings).
    • Current Assets: Assets with a likely and relatively frequent value fluctuation (e.g., inventory, cash).

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    Description

    This quiz covers essential funding sources for businesses such as crowdfunding, venture capital, and trade credit, along with concepts of financial forecasting like break-even analysis and variable costs. Test your knowledge on various financial strategies and their implications for business success.

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