Start-up Planning and Running Costs

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

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

<p>Sole traders have unlimited liability, while limited companies do not. (C)</p> Signup and view all the answers

<p>Marketing expenses (D)</p> Signup and view all the answers

<p>Consumer and competitor research (A)</p> Signup and view all the answers

<p>Expenses that remain constant in the short term (C)</p> Signup and view all the answers

<p>Raw materials needed for production (A)</p> Signup and view all the answers

<p>To determine the level of sales needed to cover total costs (A)</p> Signup and view all the answers

<p>Advertising and marketing expenses (B)</p> Signup and view all the answers

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

<p>Price per Unit × Quantity Sold (A)</p> Signup and view all the answers

<p>An excess of expenses over income (B)</p> Signup and view all the answers

<p>Amount remaining after variable costs are deducted from sales revenue (D)</p> Signup and view all the answers

<p>Utilities with variable usage charges (D)</p> Signup and view all the answers

<p>Cash is a measure of liquidity, while profit reflects total earnings (A)</p> Signup and view all the answers

<p>Pricing strategies based on cost coverage (A)</p> Signup and view all the answers

<p>Raw material costs (C)</p> Signup and view all the answers

<p>Excess revenue over needed expenses (C)</p> Signup and view all the answers

<p>To ensure there is enough cash to meet daily operational needs (B)</p> Signup and view all the answers

<p>Actual income or savings exceed what was planned (A)</p> Signup and view all the answers

<p>Equity financing (C)</p> Signup and view all the answers

<p>Determining when total revenue equals total expenses (D)</p> Signup and view all the answers

<p>By assessing potential outcomes of different scenarios (C)</p> Signup and view all the answers

<p>Identify problems before they become serious (D)</p> Signup and view all the answers

<p>Unexpected problems or inefficiencies (C)</p> Signup and view all the answers

<p>Deferred expenses (D)</p> Signup and view all the answers

<p>To ensure long-term success and stability (C)</p> Signup and view all the answers

<p>Profit is a broader measure of business performance than cash (A)</p> Signup and view all the answers

<p>Compare planned financial outcomes with actual results (A)</p> Signup and view all the answers

<p>Implement corrective actions or cost reduction strategies (D)</p> Signup and view all the answers

<p>It is based on predicted data rather than actual results (B)</p> Signup and view all the answers

<p>Personal liability for business debts (C)</p> Signup and view all the answers

<p>To ensure it can pay bills and invest in growth (B)</p> Signup and view all the answers

<p>To guide strategic financial decisions (D)</p> Signup and view all the answers

<p>Retained earnings (B)</p> Signup and view all the answers

<p>Public Limited Company (PLC) (D)</p> Signup and view all the answers

<p>Full control and personal liability for debts (A)</p> Signup and view all the answers

<p>By being overseen by regulators (D)</p> Signup and view all the answers

<p>Profitability and business performance (C)</p> Signup and view all the answers

<p>To ensure business operations can function effectively (A)</p> Signup and view all the answers

<p>Retaining earnings within the business (B)</p> Signup and view all the answers

<p>It may struggle to pay bills or employees despite being profitable on paper (D)</p> Signup and view all the answers

<p>To help them assess the risk and return on their investment (D)</p> Signup and view all the answers

<p>Sharing control and decision-making (B)</p> Signup and view all the answers

<p>To improve the owner's return on investment (C)</p> Signup and view all the answers

<p>The relationship between costs, business volume, and profitability (D)</p> Signup and view all the answers

<p>Selling Price per Unit - Variable Costs per Unit (A)</p> Signup and view all the answers

<p>A snapshot of a company’s assets, liabilities, and equity (C)</p> Signup and view all the answers

<p>Assets minus Liabilities (B)</p> Signup and view all the answers

<p>The efficiency of production in relation to sales revenue (B)</p> Signup and view all the answers

<p>Profitability in relation to capital employed (D)</p> Signup and view all the answers

<p>Short-term liquidity and ability to cover day-to-day expenses (D)</p> Signup and view all the answers

<p>All produced units are sold without refunds (D)</p> Signup and view all the answers

<p>The contribution margin of individual products sold (B)</p> Signup and view all the answers

<p>Gross Profit - Operating Expenses - Taxes - Interest (A)</p> Signup and view all the answers

<p>Current assets (B)</p> Signup and view all the answers

<p>It can simplify more complex business situations (D)</p> Signup and view all the answers

<p>Obligations or debts owed to others (C)</p> Signup and view all the answers

<p>When determining pricing and product mix decisions (D)</p> Signup and view all the answers

<p>To evaluate cash flow and short-term obligations (D)</p> Signup and view all the answers

<p>They indicate the potential return from investments (C)</p> Signup and view all the answers

<p>Both liquidity and profitability need to be balanced for long-term success (D)</p> Signup and view all the answers

<p>Struggling to manage cash flow despite generating profits (A)</p> Signup and view all the answers

<p>They provide insights into how effectively resources generate revenue (B)</p> Signup and view all the answers

<p>They can fluctuate due to short-term factors (D)</p> Signup and view all the answers

<p>Sustain liquidity for operational flexibility (A)</p> Signup and view all the answers

<p>Assesses the ability to manage long-term obligations (C)</p> Signup and view all the answers

<p>Enhancing profitability to cover short-term debt (D)</p> Signup and view all the answers

<p>They can exacerbate the limitations of financial ratios (D)</p> Signup and view all the answers

<p>The company is efficient in producing goods at a good markup. (A)</p> Signup and view all the answers

<p>Operating Profit / Revenue (C)</p> Signup and view all the answers

<p>The company may have liquidity problems. (A)</p> Signup and view all the answers

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

<p>Long-Term Debt / Equity Capital (C)</p> Signup and view all the answers

<p>The company is efficiently managing inventory. (D)</p> Signup and view all the answers

<p>Time taken to collect payments from customers. (D)</p> Signup and view all the answers

<p>Good credit terms with suppliers. (B)</p> Signup and view all the answers

<p>Efficiency of a business in using assets to generate revenue. (D)</p> Signup and view all the answers

<p>Difficulty in paying interest on loans. (B)</p> Signup and view all the answers

<p>Low reliance on borrowed funds. (B)</p> Signup and view all the answers

<p>Offers concrete data on profitability and solvency. (A)</p> Signup and view all the answers

<p>Interest and tax expenses. (B)</p> Signup and view all the answers

<p>The company has sufficient liquid assets to cover its liabilities. (D)</p> Signup and view all the answers

<p>To measure the financial health of the business. (B)</p> Signup and view all the answers

<p>Solvency ratios. (A)</p> Signup and view all the answers

<p>They may manipulate financial data representation. (B)</p> Signup and view all the answers

<p>By helping the business adjust to external changes. (D)</p> Signup and view all the answers

<p>Financial and non-financial information. (C)</p> Signup and view all the answers

<p>They help assess how well competitors are performing in the market. (B)</p> Signup and view all the answers

<p>Capacity to generate profits from sales. (A)</p> Signup and view all the answers

<p>It can provide a skewed view without context. (A)</p> Signup and view all the answers

<p>Activity ratio. (D)</p> Signup and view all the answers

<p>To gain insights into customer preferences and competition. (C)</p> Signup and view all the answers

<p>They indicate the ability to meet short-term obligations. (A)</p> Signup and view all the answers

<p>Track performance and find areas for improvement. (D)</p> Signup and view all the answers

<p>It may mislead stakeholders about financial health. (A)</p> Signup and view all the answers

<p>They help assess earning potential and ability to meet obligations. (B)</p> Signup and view all the answers

The process of starting a new business, involving setting up operations, legal structure, and securing funding.

Understanding the target market, competitors, and customer needs. This helps determine the need for the product or service.

A detailed plan outlining a business' goals, strategy, and financial projections.

Costs that remain constant regardless of business activity or sales, like rent or utilities.

Costs that vary based on production or sales levels, like raw materials.

Costs that have both fixed and variable components, like a phone bill with a flat charge plus per-minute usage fees.

The financial gain when total revenue exceeds costs and expenses.

Expenses necessary for day-to-day business operations, like salaries or marketing.

Revenue generated minus all costs associated with making and selling the product or service.

Revenue minus the cost of goods sold and all operating expenses. Shows true profitability of business operations.

The financial outcome after deducting all expenses from revenue. Represents overall profitability.

A process of forecasting future cash inflows and outflows to ensure sufficient funds for daily operations.

A business structure where one individual is the owner and bears all the risks and profits.

A type of business where two or more individuals share ownership, profits, and liabilities.

A business structure where partners have limited liability, meaning they are only responsible for their investment.

A separate legal entity from its owners, with limited liability and shares not traded publicly.

A company whose shares are traded on a stock exchange, offering growth potential but with greater regulations.

A non-profit business focused on serving the community, with profits reinvested for social good.

A business owned and run by members, sharing profits and democratic decision-making.

Funds generated from within the business, such as retained earnings or owner investments.

Funds raised from outside the business, such as bank loans, equity financing, or grants.

Profit kept within the business for future investment rather than distributed to owners.

A business plan clearly outlining the financial goals, strategies, and projections for future success.

The amount each unit sold contributes towards covering fixed costs and generating profit.

A snapshot of a company's assets, liabilities, and equity at a specific point in time.

Resources owned by a business that have value.

The obligations or debts the business owes to others.

The difference between a company's current assets and current liabilities.

The value of the owner's interest in the business, calculated as assets minus liabilities.

A financial tool that helps businesses understand the relationship between costs, volume, and profitability.

Measures the profitability of a business in relation to the capital employed (equity and debt).

The percentage of sales revenue that exceeds the cost of goods sold (COGS).

A technique that compares budgeted results to actual results.

A financial tool that helps assess the potential outcomes of different scenarios.

Tracks the money coming in and going out of a business.

A financial statement that summarizes all revenues and expenses incurred during a period.

A financial statement showing the inflow and outflow of cash over a period, highlighting money coming into and going out of the business.

Measures how easily an asset can be turned into cash without impacting its price. It's essential for meeting short-term obligations.

A technique for predicting future business outcomes by considering various scenarios and adjusting key factors like sales, costs, or interest rates.

Comparing actual financial results with planned budgets to understand discrepancies and identify reasons for the differences.

The difference between actual results and budgeted outcomes. It can be favorable (better than expected) or adverse (worse than expected).

This happens when a business cannot meet its financial obligations because it owes more than it owns.

A situation where actual income or savings exceed planned expectations, indicating positive performance or efficiency.

When actual income is lower or costs are higher than planned, indicating potentially negative performance or inefficiencies that need to be addressed.

Revenue is money earned from business operations, while capital expenditure is long-term investment in assets.

Profit/loss shows financial success, while surplus/deficit indicates whether income exceeds or falls short of expenses.

A method used to calculate the point where sales revenue equals total costs, indicating the point where a business starts making a profit.

A technique that determines how much money from sales contributes to covering fixed costs, helping assess the profitability of each sale.

Cash is money available now, while profit is a wider measure of business performance across a period.

Regularly tracking cash flow helps businesses avoid financial problems, make informed choices, and manage liquidity effectively.

A business needs to balance both profit and cash flow to ensure long-term success and stability.

Costs that stay the same no matter how much you produce, like rent or your salary.

Costs that change directly with how much you produce or sell, like materials used for each item.

Operating Profit Margin reveals the percentage of revenue left after all operating costs, excluding interest & taxes, highlighting efficiency.

Measures a company's ability to pay short-term liabilities with current assets, indicating liquidity and short-term financial health.

Costs that have both fixed and variable parts, like a phone bill with a base cost and charges per minute.

The total money your business earns from selling goods or services.

Assesses a company's ability to meet short-term liabilities with the most liquid assets, excluding inventory, for a more conservative measure.

Money spent on things that help your business run every day, like salaries or utilities.

The gearing ratio shows what percentage of a company's capital comes from borrowing, highlighting financial risk.

Inventory Turnover quantifies how quickly a company sells and replenishes its inventory, showing efficiency in managing stock.

Money spent on assets that help run your business for a long time, like buying new equipment or a building.

Trade Receivables Collection Period measures the average days it takes to collect payments from customers, indicating cash flow health.

The difference between your total revenue and total costs, telling you if you made a profit or loss.

Trade Payables Payment Period measures the average days a company takes to pay its suppliers, highlighting credit terms and financial health.

When your total revenue is more than your total expenses, meaning your business has made money.

Asset Turnover measures how effectively a company utilizes its assets to generate revenue, highlighting asset efficiency.

When your total expenses are more than your total revenue, meaning your business has lost money.

The point where your total revenue equals your total costs, meaning you break even – no profit or loss.

Helps businesses decide the right prices by figuring out how many sales they need to cover their costs.

It assists in forecasting and understanding how changes in costs and prices impact your profitability.

It shows you how many units you need to sell to start generating profit.

It helps you assess the risk of making a loss if you don't reach the break-even point.

Break-even analysis is helpful for setting your financial goals and budget for the future.

The actual money that a business has on hand, including cash in the bank and cash in hand.

The difference between your total revenue and total expenses, even including things not paid in cash like depreciation.

Cash is a measure of how much money you have available to pay bills, while profit is a measure of how much money you have earned.

Financial statements primarily focus on past performance, offering limited insights into future trends or emerging opportunities.

Financial reports neglect external factors like market shifts, customer satisfaction, or employee morale, impacting overall business health.

High-level summaries can overlook important details within financial information such as specific operating expenses or market segment performance.

Financial data can be manipulated or misrepresented intentionally, especially if accounting practices lack consistency.

Analyzing competitors' financial reports helps understand their market performance, including profitability, spending, and financial strength, providing valuable insights for improvement.

Businesses adapt their plans based on changing customer preferences, new technologies, and evolving regulations, staying competitive in the market.

Understanding customer needs, market size, competitor landscape, and growth potential helps businesses tailor products and services to match market demands.

Combining financial information like profitability ratios, solvency ratios, and activity ratios with non-financial information like market trends, customer opinions, and competitor actions, and strategic considerations like long-term goals and future opportunities, is crucial for making informed decisions.

Profitability ratios measure a company's ability to generate profits from its revenue and capital, showcasing financial success.

Solvency ratios assess a company's capacity to fulfill its long-term financial obligations, demonstrating stability and financial health.

Activity ratios examine a company's efficiency in managing operations, including inventory, receivables, and payables, indicating effective resource utilization.

Financial data provides objective information and benchmarks for comparison, but its limitations in forecasting future trends and capturing non-financial factors should be considered.

Published accounts of competitors, market trends, and industry research help businesses stay competitive and make informed decisions based on external factors.

Financial ratios provide valuable insights into a business's financial health, but they should be used alongside qualitative data and considered within the context of industry norms and market conditions.

Profitability ratios measure a company's ability to generate profits from its revenue and capital, showcasing financial success. Solvency ratios assess a company's capacity to fulfill its long-term financial obligations, demonstrating stability and financial health. Activity ratios examine a company's efficiency in managing operations, including inventory, receivables, and payables, indicating effective resource utilization.

A snapshot of the company's ability to meet its short-term financial obligations, like paying suppliers or covering operating expenses. Strong liquidity means the business has enough cash on hand to function smoothly.

A combination of all three types of ratios (profitability, solvency, and activity) provides a comprehensive view of a company's financial health. They can help make strategic decisions and identify areas for improvement.

A business needs to balance profitability (generating enough income) with liquidity (having enough cash on hand). A high profit margin may not be sustainable if a company struggles to meet its immediate financial obligations.

Analyzing a business solely based on their profitability ratios can be misleading, as profitability may be influenced by external factors like market conditions. A comprehensive analysis considers industry trends and competitor performance for a clearer picture.

While profitability ratios show how well the business is performing, they don't necessarily guarantee long-term sustainability. A company needs to ensure it has enough cash flow to manage operations and meet its financial obligations.

Financial ratios provide valuable insights, but don't tell the whole story. Analyzing them alongside external factors like market conditions, industry trends, and competitor performance can offer a more realistic picture of a company's financial health.