What is the name for the overall goal that a business hopes to reach over a given period of time?
Aim
What is meant by a business objective?
A plan of action showing how a business will reach its goal
Which aim means having enough money put aside to cover costs and provide the owner with a comfortable living?
Financial security
What is meant by survival as an aim of a new business?
Keeping the business open and trading
What is the name for aims that focus on improving the lives of others, where any profit made is reinvested to support the cause?
Social objectives
What is meant by personal satisfaction as an aim of a start-up business?
Creating and selling a product that the owner believes in and thinks is better than rivals
Which of these is a financial aim that a new business start-up might set?
To increase sales
A new sandwich shop has been trading for four months and is making a loss each month. Which aim is most likely to be its main priority at this stage?
Survival
A business sells 2,000 of the 20,000 units sold in its market during a year. What is its market share?
10 per cent
Which business is most likely to have financial security as its main aim?
A family run bakery whose owners want a steady income
A community cafe gives all of its profits to a local food bank that feeds families in need. Which type of aim does this show?
A social objective
Priya left her job to start her own bakery. She says the best part is deciding what to sell and when to work, rather than following orders. Which non-financial aim does this describe?
Independence and control
Which factor best explains why two businesses in the same market may set different aims?
The owners have different personal interests and goals
What is meant by challenge as an aim of a start-up business?
Setting up a business to test the owner's skills by filling a gap in the market
A bakery sets an aim to double its monthly sales over the next year. Which of these is an objective that would help it reach this aim?
To gain five new regular customers each month
A garden centre has traded successfully for ten years. The owner now aims to open three more centres in the county. Why is this aim different from the one the business had at start-up?
Aims often change as the business grows and the owner sets new targets
Dan runs a courier business that has covered its costs for two years. He now wants the business to make as much money as possible so he can expand it. Which financial aim is he focusing on?
Profit
A small bakery wants to serve a bigger share of the customers in its town than any rival does. Which financial aim is this?
Increasing market share
Which term describes the money a business earns from selling its goods or services over a set period of time?
Revenue
What is meant by 'fixed costs'?
Costs that do not change when the level of output changes
What is the name for the point at which a business's total revenue is exactly equal to its total costs?
Break-even output
What is meant by 'margin of safety'?
The amount by which a business's current output is greater than its break-even output
What is the name for the payment made for the use of borrowed money, charged as a percentage of the amount borrowed?
Interest
What is meant by 'loss'?
When a business's total costs are higher than its total revenue
A business sells 250 units at a price of £35 each. What is its total revenue?
£8,750
Which of the following is a fixed cost for a bakery?
The rent paid each month on the shop
A business produces no output for a month. What happens to its variable costs?
They fall to zero because nothing is produced
A business has fixed costs of £18,000 for the year and makes 35 products that each cost £25 to make. What are its total costs?
£18,875
A business has total revenue of £12,000 and total costs of £9,500. What is its profit?
£2,500
A business borrows £20,000 at an interest rate of 5% per year. How much interest does it pay in the first year?
£1,000
A business has fixed costs of £3,000. Each unit sells for £10 and has variable costs of £5. It sells 750 units. What is its margin of safety?
150 units
What is meant by 'variable costs'?
Costs that change as the level of output changes
What is meant by 'total costs'?
The fixed costs added to the variable costs
A business has fixed costs of £3,000 a month. Each unit is sold for £20 and has variable costs of £5. What is its break-even output?
200 units
A business's rent rises, but its selling price and variable costs stay the same. What happens to its break-even output?
It rises, because more units are needed to cover fixed costs
On a break-even chart, how can you tell that a business is making a profit at a particular level of output?
The total revenue line is above the total costs line
A business increases its output, but its fixed costs and the variable cost per unit stay the same. What happens to its total costs?
They rise, because variable costs rise with output
Which of these is a cash outflow for a business?
Paying rent on a shop
Why is it important for a business to have sufficient cash?
So it can pay its bills and avoid insolvency
Which statement about cash and profit is correct?
A profitable business can still run out of cash
A business has cash inflows of £9,000 and cash outflows of £7,400 in April. What is its net cash flow for April?
£1,600
A business opens June with £2,000 in the bank. Its cash inflows are £5,000 and its cash outflows are £6,200. What is its closing balance?
£800
In a cash-flow forecast, the closing balance of one month becomes what in the following month?
The opening balance
A cash-flow forecast shows a negative net cash flow in March but a positive closing balance. What does this mean?
Cash outflows were higher than inflows in March
A cash-flow forecast shows a closing balance of -£500 for July. Which statement is correct?
The business is forecast to have a cash shortage of £500
Which term describes the money that a business receives over a period of time, for example from the sale of its products?
Cash inflow
What is meant by 'cash flow'?
The movement of money into and out of a business over a period of time
What is the name for the figure found by taking the total money a business receives in a period and subtracting the total money it pays out?
Net cash flow
What is meant by 'insolvency'?
When a business cannot pay its debts and may be forced to stop trading
What is the name for a plan that sets out the money a business expects to receive and pay out over a future period?
Cash-flow forecast
What is meant by the 'closing balance'?
The amount of cash a business expects to hold at the end of a period
What is meant by a cash outflow?
Money that a business pays out over a period of time
What is meant by the opening balance?
The amount of cash a business expects to hold at the start of a period
Why does a business prepare a cash-flow forecast?
To predict when it may run short of cash and plan ahead
A business makes a profit in March, but the cash in its bank account falls during the month. Which of these best explains this?
Customers who bought on credit have not paid yet
A cash-flow forecast shows a closing balance of £1,200 at the end of May and £400 at the end of June. What was the net cash flow in June?
-£800
A cash-flow forecast was prepared before a business was told its rent would rise. What is the effect of the higher rent on the forecast?
The monthly closing balances will be lower than forecast
Why might a business need finance?
To expand and launch new products
Which is a feature of short-term finance?
Used for needs up to three months
Long-term finance is most appropriate for which activity?
Buying expensive equipment and premises
What describes a bank overdraft?
Allows withdrawing more than balance
Which is a drawback of using an overdraft?
Bank can demand immediate full repayment
What is trade credit?
Supplier allows delayed payment for goods
What is a main advantage of trade credit for a buyer?
Improves short-term cash flow
A main feature of using personal savings to start a business is:
Owner keeps full control of business
What limits the use of retained profit as a finance source?
Only available if previous profits exist
Which describes share capital?
Raising money by selling company shares
A likely drawback of issuing shares is:
Original owners lose some control
What is a common feature of venture capital?
Investors gain some control and expertise
Which is an advantage of crowdfunding?
Tests public interest and aids marketing
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