Week 2: Finance Basics
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Questions and Answers

What is the primary focus of efficiency in a company?

  • Maximizing market perception
  • Achieving set goals
  • Increasing revenue growth
  • Utilizing assets effectively (correct)

    • How is effectiveness defined?

  • Evaluating achievements against set goals (correct)
  • Comparing revenues to expenses
  • Assessing market performance
  • Measuring asset utilization

    • What does the Current Ratio measure?

  • Return on investment
  • Liquidity of long-term assets
  • Company profitability
  • Ability to meet short-term liabilities (correct)

    • Which ratio is likely to be relevant for non-profits?

    <p>Debt to Equity Ratio</p> Signup and view all the answers

    What does a decreasing Days Payable indicate about a company?

    <p>The company is paying creditors faster</p> Signup and view all the answers

    Why are financial statements important for non-profits?

    <p>To satisfy legal and regulatory constraints</p> Signup and view all the answers

    What is the purpose of CADAC?

    <p>To collect and analyze data of arts organizations</p> Signup and view all the answers

    How is efficiency measured in the context of a non-profit organization?

    <p>By measuring inputs related to outputs</p> Signup and view all the answers

    What is the formula for calculating profit?

    <p>Revenue - Expenses</p> Signup and view all the answers

    Which type of profit is defined as the total earnings after all expenses have been deducted?

    <p>Net Profit</p> Signup and view all the answers

    Which of the following is NOT a type of expense incurred during business operations?

    <p>Revenue generation</p> Signup and view all the answers

    Who typically does NOT handle funds in an organization?

    <p>Customers</p> Signup and view all the answers

    What is a budget?

    <p>A financial plan estimating revenues and expenditures</p> Signup and view all the answers

    Which equation correctly represents the relationship between assets, liabilities, and owners' equity?

    <p>Assets = Liabilities + Owners' Equity</p> Signup and view all the answers

    Which term refers to income generated from normal business operations?

    <p>Revenue</p> Signup and view all the answers

    Which of the following individuals is most likely to be involved in the budgeting process?

    <p>CFO</p> Signup and view all the answers

    Which of the following describes the primary purpose of identifying sources of revenue within a budget?

    <p>To allocate resources effectively to achieve goals</p> Signup and view all the answers

    What is the completed process that involves tracking financial transactions from beginning to end?

    <p>Audit trail</p> Signup and view all the answers

    Which of the following is NOT a step in the accounting or audit cycle?

    <p>Conduct market research</p> Signup and view all the answers

    How often are interim financial reports typically prepared?

    <p>Periodically during the fiscal year</p> Signup and view all the answers

    What does the 'What' in the 5W's and How of budgeting primarily refer to?

    <p>A financial plan that aligns with organizational goals</p> Signup and view all the answers

    Which of the following best outlines the 'why' of budgeting?

    <p>To secure funding and ensure mission alignment</p> Signup and view all the answers

    During which part of the financial cycle is the final financial statement issued?

    <p>Following the trial balance</p> Signup and view all the answers

    Who is typically responsible for ensuring budget alignment with an organization's goals?

    <p>The CEO, Treasurer, or department head</p> Signup and view all the answers

    What is a key benefit of CADAC for Canadian Arts Organizations?

    <p>Submission of financial data in a unified format.</p> Signup and view all the answers

    What does Canada's progressive tax system imply?

    <p>Higher incomes face higher tax rates.</p> Signup and view all the answers

    Which of the following is NOT a deduction allowed for artists in Canada?

    <p>Expenses related to personal hobbies.</p> Signup and view all the answers

    What is a defining aspect of Key Performance Indicators (KPIs) for non-profit organizations?

    <p>Measuring audience engagement and diversity.</p> Signup and view all the answers

    Which of the following categories is NOT listed under General Taxation Principles for artists?

    <p>Attendance Maximization.</p> Signup and view all the answers

    Which question is essential in assessing the success of an organization?

    <p>Are we meeting our goals?</p> Signup and view all the answers

    What is one of the filing deadlines for self-employed individuals in Canada?

    <p>June 15.</p> Signup and view all the answers

    Which KPI category focuses on the overall financial health of an organization?

    <p>Revenue Maximization.</p> Signup and view all the answers

    What is required for good interim financial reporting?

    <p>It must be timely, accurate, detailed, and annotated.</p> Signup and view all the answers

    Which document is signed off by an authorized signatory and filed by employees?

    <p>Expense report</p> Signup and view all the answers

    What is the primary purpose of cash flow management?

    <p>To ensure bills can be paid on time and assess the need for credit.</p> Signup and view all the answers

    What distinguishes a Blue Ocean strategy from a Red Ocean strategy?

    <p>Blue Ocean focuses on new markets with little competition, while Red Ocean is competitive and existing.</p> Signup and view all the answers

    Which accounting standard is tailored specifically for non-profit organizations in Canada?

    <p>ASNPO</p> Signup and view all the answers

    What does the debt-to-equity ratio help assess?

    <p>How much debt is too much debt.</p> Signup and view all the answers

    What is reflected in a balance sheet?

    <p>Assets minus liabilities equals equity.</p> Signup and view all the answers

    In financial terms, how is a ratio defined?

    <p>A comparison of one unit to another in quantitative terms.</p> Signup and view all the answers

    Study Notes

    Week 2: Finance Basics

    • Finance (definition): Management of large sums of money by governments, businesses, or individuals. Involves providing funds for enterprises or individuals.
    • Revenue (definition): Money generated from normal business operations, calculated as average sales price multiplied by the number of units sold. Found in income statements, sales figures, and top-line/gross income.
    • Expenses (definition): Costs incurred during business operations, including wages, salaries, maintenance, rent and depreciation. This category includes COGS (cost of goods sold), operating expenses, financial expenses, and extraordinary expenses.
    • Profit (definition): Financial gain, the difference between earnings (revenue) and expenses in operations, production or investments.
      • Gross Profit: Selling price minus production cost.
      • Operating Profit: Money remaining after all business costs except taxes.
      • Net Profit: Earnings after deducting all expenses.
    • Equations:
      • Profit = Revenue - Expenses
      • Assets = Liabilities + Owners' Equity
      • Owners' Equity = Assets - Liabilities

    Week 3: Budgets

    • Statements of Earnings/Operations: Revenue minus expenses equal profit (e.g., AGO, Factory Theatre)
    • Budget Basics: A financial plan that estimates revenues and expenditures over a specific time period.
    • Involved Personnel: CFO, Treasurer, Executive Director, Department Heads.
    • Budget Purpose: Allocate resources effectively and track performance to achieve goals.

    Week 4: Budget Details (5W's and How)

    • Who: Individuals/groups responsible for the budget's creation and benefits. (e.g., CEO, Treasurer, department heads)
    • What: A financial plan.
    • When: Time period (e.g., year-end), specific cycles (e.g., grant).
    • Why: Achieve mission alignment, secure funding and report to funders.
    • How: Start with a clear vision, gather quotes, and identify revenue streams.

    Week 5: Accounting Cycle

    • Financial Reports: Illustrate financial activity.
    • Monthly Reports: Similar to financial news updates.
    • Annual Reports: Similar to yearbooks.

    Week 6: Interim Financials

    • Interim Financial Reporting (definition): Reports prepared periodically during a fiscal year to track performance, provide transparency and enable better decision-making.
    • Key Interim Reports: Expense, cost, cash flow, budget summaries, quarterly statements, financial statements.

    Week 7: Cash Flow

    • Definition: Tracking inflows (revenue) and outflows (expenses) over a specific time period.
    • Inflows: Sales, grants, investments.
    • Outflows: Salaries, expenses.
    • Purpose: Ensure bills are paid on time and assess credit requirements.

    Week 8: Strategic Differentiation

    • Red Ocean Strategy: Competing in existing markets, e.g., Broadway shows, Walmart.
    • Blue Ocean Strategy: Creating new markets with little competition, e.g. Netflix, Amazon.

    Week 9: Accounting Standards

    • GAAP: Generally Accepted Accounting Principles (US).
    • IFRS: International Financial Reporting Standards (Canada).
    • ASPE: Accounting Standards for Private Enterprises (Canada).
    • ASNPO: Accounting Standard for Non-Profit Organizations (Canada).
    • Financial Statements: Basic financial documentation. (Balance Sheet, Income Statement).

    Week 10: Ratios

    • Ratios (definition): A comparison of one unit to another, showing how many times one value contains or is contained within the other.
    • Types of Ratios: Liquidity, Profitability, Debt, Efficiency and Market.

    Week 11: CADAC and Taxes

    • CADAC: Canadian Arts Data, used for financial and statistical information about Canadian arts organizations.
    • Benefits: Data consistency, reporting efficiency, accountability improvement.

    Week 12: Key Performance Indicators (KPIs)

    • Definition: Metrics for measuring organizational success and health.
    • For-Profit: Revenue growth, profitability, effectiveness, efficiency, equity, debt:equity ratios
    • Non-Profit: Audience engagement, diversity, innovation.
    • Categories: access, attendance, diversity, economy, education, excellence, innovation, revenue, service, social, cohesion, economic, impact, prestige.
    • Success Assessment Questions: Meeting goals, using resources efficiently, growing audience/impact.

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    Description

    Dive into the fundamental concepts of finance in this Week 2 quiz. Explore definitions and implications of key terms such as revenue, expenses, and profit. Assess your understanding of how these elements interact within business operations.

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