Understanding Business Budgeting Basics

What is a fixed cost in a business context?

• A cost that changes with the level of production

• A cost that remains constant regardless of production levels

• A cost that varies with the number of employees

• A cost that decreases over time

Which of the following is an example of a variable cost?

• Rent for office space

• Salaries of permanent staff

• Raw materials used in production

• Insurance premiums

Why is cash flow important for a business?

• It determines the company's profit margin

• It ensures that a business can meet its short-term obligations

• It is used to calculate the company's tax liability

• It helps in setting the company's long-term goals

Which tool is commonly used for budgeting in businesses?

• SWOT Analysis

• Balance Sheet

• Cash Flow Statement

• Gantt Chart

What is the primary difference between fixed and variable costs?

• Fixed costs are always higher than variable costs

• Variable costs change with production levels, while fixed costs do not

• Fixed costs are only applicable to large businesses

• Variable costs are only applicable to service industries

Which of the following statements is true about cash flow?

• Positive cash flow means a company is profitable

• Negative cash flow always indicates a failing business

• Cash flow is the same as net income

• Cash flow measures the inflow and outflow of cash in a business

Identify a tool that helps in forecasting future financial performance.

• Income Statement

• Budgeting Software

• Market Analysis

• Employee Handbook

Which of the following is NOT a fixed cost?

• Lease payments

• Utility bills

• Depreciation

• Property taxes

What does a cash flow statement primarily track?

• Revenue and expenses

• Assets and liabilities

• Cash inflows and outflows

• Equity and debt

Which of the following is a benefit of using budgeting tools?

• They eliminate all financial risks

• They provide real-time financial insights

• They guarantee increased profits

• They reduce the need for financial audits