Year 1 A-level up to Budgeting

A business wants to assess its profitability; which would not enable a more reliable assessment to be made?

• Several years profit data

• Industry standards

• A cashflow forecast

• A breakdown of costs between cost of sales and expenses

Which does NOT apply to using a Venture Capitalist as a Source of Finance?

• A loss of control over decision-making

• A reduction in profits due to interest

• The giving up of some profits

• The gaining of expert advice

How is net cashflow obtained in a Cashflow Forecast?

• By taking all the outflows from the inflows

• By taking the previous month's closing balance

• By taking all the inflows from the outflows

• By adding the inflows to the outflows

An improvement in a net profit margin is likely to be gained when more goods are sold because...

• Fixed expenses are not likely to rise

• Fixed expenses are not likely to rise by the same proportion as sales

• Gross margin will increase

• Fixed expense are likely to fall

A business makes a net profit margin of 15%. It has sales of £200,000 and a gross profit margin of 60%. What is the value of its expenses?

• £80,000

• £30,000

• £50,000

• £90,000

Which is a NOT a valid way of improving cashflow?

• Obtaining an overdraft

• Reducing trade credit with suppliers

• Reducing trade credit to customers

• Increasing gross profit

Which is NOT valid limitation or benefit of Cashflow Forecasting?

• It enables a business to identify cash shortfalls

• It can demonstrate sound planning when applying for external finance

• It is difficult to forecast with accuracy

• It can help to identify future profitability

One drawback to improving cashflow to a stakeholder is...

• Banks - more likely to receive their loans back

• Suppliers may be asked to deliver smaller quantities more frequently

• Suppliers more likely to get paid for their goods

• Employees are not likely to be paid on time

A business has sales of £400,000 and cost of sales of £260,000. Last year its gross profit margin was 30%. What is the most likely cause of the change in gross profit margin?

• A reduction in raw material costs

• A reduction in prices

• A reduction in expenses

• A reduction in sales volume

A business has variable costs per unit of £16 and sells its products for £40. Its profit is £25,000 and fixed expenses are £23,000. How many products does it sell?

• 1,200

• 200

• 2,000

• 2,500