FInance Management

Why planning is crucial for a seasonal business’ cash flow?

• Steady cash flow.

• Cash inflow concentrated in a few months.

• Consistent cash flow throughout the year.

• Unpredictable cash flow.

Define the "breakeven point" in the context of financial management for a business?

• The point when a business starts losing money.

• The point when a business covers all expenses and starts earning a profit.

• The point when a business reaches its maximum sales potential.

• The point when a business decides to shut down.

What is the formula for calculating Return on Investment (ROI)?

• Profit / Selling Price

• Profit / Investment Amount

• Investment Amount / Profit

• Selling Price / Profit

Why is ROI considered a better metric than pure profit?

• It accounts for dividends

• It factors in the selling price

• It considers the investment amount

• It measures the holding period

What is one limitation of ROI?

• It doesn't factor in the investment amount

•  It doesn't consider the selling price

• It doesn't account for dividends

• It doesn't factor in the holding period

Mark invested $800 in a tech stock and sold it for $1,200 after two years. During this time, he received $50 in dividends. Jane invested $1,500 in a real estate property and sold it for $1,800 after three years, incurring $100 in maintenance and property taxes during these three years.

Which investor would you prefer to have?

• Mark

• Jane

• It cannot be determined without additional information.

• Both investors give same returns

How does a sales budget contribute to business planning?

• It controls expenses

• It estimates future sales revenue

• It minimizes production costs

•  It focuses on market analysis

Which factors are typically considered when preparing a sales budget?

• Production costs

• Administrative costs

• Historical data and market analysis

• Profit projections

Why is a profit budget considered a benchmark for assessing financial performance?

• It determines market trends

•  It controls expenses

•  It estimates future sales volume

• It combines sales and cost budgets

Why is sound cash flow management vital for a business?

• It helps in hiring more staff 

• It ensures smooth business operations 

• It expands the range of products 

• It impacts personal finances