BTEC Business Revision Exam 55 Questions with Verified Answer
Breakeven -CORRECT ANSWER When revenue and expenditure are the same. there is no profit
... [Show More] or loss
variable costs -CORRECT ANSWER raw materials, change as output increases
margin of safety -CORRECT ANSWER is the amount by which sales would have to fall before the break-even point is reached
total costs -CORRECT ANSWER fixed costs plus variable costs
break-even point -CORRECT ANSWER when a business has made enough money through product sales to cover the cost of making the product
selling price -CORRECT ANSWER total revenue divided by maximum number of products
increasing the price -CORRECT ANSWER break even point falls
reduce the price -CORRECT ANSWER break even point becomes higher
break even analysis -CORRECT ANSWER planning tool that helps businesses to make the right decisions and increase their chances of success
benefits of break even analysis -CORRECT ANSWER business knows the fixed and variable costs linked to a product.
the business can set the best price for a product.
it allows the business to set a margin of safety.
risks of ignoring breakeven analysis -CORRECT ANSWER the business does not know the costs of production and running costs.
the business does not know how many items it must sell to make a profit.
the business may make a loss without realising or knowing why.
break even point will change -CORRECT ANSWER if costs change or if the selling price changes
if costs fall -CORRECT ANSWER the breakeven point is lower so the business makes a profit
the lower the breakeven point -CORRECT ANSWER the fewer the sales needed to make a profit
total sales revenue formula -CORRECT ANSWER number of sales times price per unit
to make a profit -CORRECT ANSWER revenue must be higher than expenditure
profit formula -CORRECT ANSWER revenue take away expenditure
netflow/outflow formula -CORRECT ANSWER inflows take away outflows
net inflow -CORRECT ANSWER increases money already in the bank
net outflow -CORRECT ANSWER reduces the money already in the bank
improving inflows -CORRECT ANSWER chase up late payments.
avoid giving credit to unknown customers.
give discounts for early payment.
improving outflows -CORRECT ANSWER delay some payments.
reduce stock levels.
make cutbacks to reduce expenditure.
cash flow forecasting -CORRECT ANSWER planning tool, it helps businesses avoid the risk of serious money problems and to plan for success
benefits of cash flow forecasting -CORRECT ANSWER expensive items can be bought at the best time.
the timing of inflows and outflows is known.
surplus cash can be invested.
risks of not forecasting cash flow -CORRECT ANSWER late inflows may not be identified.
there may not be enough cash to pay for bills or wages.
the business may run out of money and have to cease trading.
costs of sales -CORRECT ANSWER money it costs to make a product
gross profit formula -CORRECT ANSWER revenue take away cost of sales
gross profit -CORRECT ANSWER money made from selling a product after the cost of producing it has been deducted
positive gross profit -CORRECT ANSWER good news to the business.
money to pay for expenses.
money available for better equipment or expansion.
the cost of sales is not too high.
negative gross profit
cost of sales is higher than revenue -CORRECT ANSWER bad news to the business.
no money to pay for expenses or wages without a loan or overdraft which increases costs.
cost of sales is too high.
sales revenue is too low.
net profit is the money made from selling a product after all costs have been deducted -CORRECT ANSWER amount you have left after you have deducted your expenses from your gross profit
net profit formula -CORRECT ANSWER gross profit take away expenditure
positive net profit - good news to the business -CORRECT ANSWER gross profit is more than expenditure.
expenditure is less than gross profit.
the business has money it can use to expand or improve.
negative net profit - bad news to the business -CORRECT ANSWER gross profit is less than expenditure.
expenditure is too high.
the business is losing money.
buying cheaper raw materials -CORRECT ANSWER improve gross and net profit
financial statements -CORRECT ANSWER shows whether or not a business is doing well
assests -CORRECT ANSWER items owned by the business that are worth money.
liabilities -CORRECT ANSWER debts or obligations owed by the business
income statement, profit and loss account -CORRECT ANSWER shows profit or loss made by the business over a period of time
statement of the financial position, balance sheet -CORRECT ANSWER this lists assets and liabilities
fixed assets -CORRECT ANSWER needed for the business to be able to trade
current assests -CORRECT ANSWER which are cash or which can be easily converted into cash.
stock - which is sold to customers.
cash - received from customers and paid out to buy new stock.
trade receivables - debtors -CORRECT ANSWER customers who owe money
current liabilities -CORRECT ANSWER debts that must be paid soon
trade payables creditors -CORRECT ANSWER suppliers that the business must pay
overdrafts -CORRECT ANSWER short-term. bank loans
long-term liabilities -CORRECT ANSWER funds borrowed over a long time
working capital -CORRECT ANSWER the money the business needs every day to trade.
needs to be enough to run the business
working capital formula -CORRECT ANSWER current assets take away current liabilities
capital -CORRECT ANSWER money from internal sources such as shareholders or from external sources such as bank loans
retained profit -CORRECT ANSWER earlier profits the owner has kept in the business; an internal source of capital
stock -CORRECT ANSWER too much, sell it off
too little, buy some more
trade receivables -CORRECT ANSWER if this is high then collect payments from debtors
cash -CORRECT ANSWER if this is low, chase up debts or sell off slow-moving stock
trade payables -CORRECT ANSWER of debts to suppliers are high, they may stop providing goods [Show Less]