4.5 Starter Activity

Why is it important for a business to track revenue and expenditure. Select the answers that apply.

• Maximise tax deductions

• Manage cash flow effectively

• Ensure revenue and expenditure is within budget

• To take all the employees on holiday

Which one of these is not a risk of poor financial management controls?

• Business risk

• Traffic risk

• Legal risk

• Financial risk

What type of risk is external and outside of the business's control?

• Business risk

• Non-business risk

• Legal risk

• Fiduciary risk

What type of risk is it when two parties trust each other to either supply or pay for goods and one party fails to keep their side of the agreement. Either, goods paid for in advance are not delivered or goods delivered are not paid for.

• Equity risk

• Credit risk

• Liquidity risk

• Asset backed risk

The difference between the amount budgeted for spend in the forecast compared to the actual amount spent, it can be a positive or negative figure.

• Profit

• Loss

• Variance

• Balance

Why is forecasting arguably one of the most important processes in a business?

Select the relevant options.

• It is key to effective business planning.

• Forces management to look to the future and set detailed plans to achieve future goals and objectives.

• Defines areas of responsibility/

  ownership.

• Ensures that a new product does not fail in the market

What is the process for organising and administering a budget?

Select the relevant options.

• Set up responsibility centres

• Decide what you are going to sell

• Appoint a budget control office

• Appoint a budget committee

Which one of these is not a responsibility centre?

Select the odd one out

• Cost Centre

• Profit Centre

• Finance Centre

• Investment Centre

There are 5 key budgets in total used to develop a forecast.

Which is the odd one out?

• Sales Budget

• Production Budget

• Marketing Budget

• Workforce Budget

What is the return on investment if a business invested £200,000 in a subsidiary and they returned a net profit of £45,000?

• 122%

• 22.5%

• 125%

• 155%