Understanding Growth and Liquidity Concepts

Tico and Daisy start a small bakery. As they bake and sell more bread, they notice that the average cost of making each loaf goes down. Which of the following best describes this situation?

• The increase in costs as a business grows larger

• The reduction in average costs as output increases

• The increase in market share due to advertising

• The decrease in revenue as production rises

Zoe and Angus are planning to expand their small bakery business. What is a primary objective of their business growth?

• To reduce market share

• To achieve economies of scale

• To increase diseconomies of scale

• To decrease brand recognition

When Zoe's company grows and hires specialised managers within the firm, which of the following is this an example of?

• Bulk buying discounts from suppliers

• Improved access to finance

• Specialised managers within the firm

• Industry-wide technological improvements

Angus and Zoe run a bakery in a small town where there are no other bakeries nearby. What is meant by 'market power' in this context of their business growth?

• The ability to set higher prices due to lack of competition

• The ability to reduce costs through automation

• The ability to increase staff wages

• The ability to decrease product quality

Louis and Daisy are discussing the success of a popular sportswear company that recently increased its brand recognition. Which of the following is a benefit the company might experience as a result?

• Lower staff morale

• Higher customer loyalty

• Reduced profitability

• Increased diseconomies of scale

Tico and Daisy are analysing a company that holds a high market share in its industry. This company is likely to:

• Have less influence over suppliers

• Have more bargaining power with suppliers

• Face higher average costs

• Have lower brand recognition

Harriet and Vy started a small tech company that quickly became very popular. As their business grew rapidly, which of the following is a problem they might face?

• Improved internal communication

• Diseconomies of scale

• Decreased market share

• Lower profitability

Zoe and Cameron started a small business selling handmade crafts. They quickly expanded by opening several new shops, but did not have enough working capital to support this rapid growth. What is this situation called?

• Selling products at a loss

• Expanding too quickly without sufficient working capital

• Reducing the number of products sold

• Increasing prices to unaffordable levels

Zoe and Angus are managing the finances of their school club. They want to improve the club's liquidity. Which of the following is a way they could do this?

• Increasing inventory levels

• Delaying payments to suppliers

• Reducing cash reserves

• Increasing long-term assets

Angus is reviewing the financial health of his small business. He wants to calculate the current ratio. How should Angus do this?

• Current assets divided by current liabilities

• Current liabilities divided by current assets

• Total assets divided by total liabilities

• Cash divided by inventory