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WorksheetsAI Business Paper 2 Quiz
Total questions: 103
Worksheet time: 26hrs 45mins
Which of the following calculations would you use to find total costs?
Fixed Costs + Variable Costs
Selling Price – Fixed Costs
Total Fixed Costs / Selling Price – Variable Cost
Total Fixed Costs/Variable Cost Per Item
If there was a rise in variable costs what effect would this have on the break even chart?
total cost line pivots downwards
fixed cost line and total cost line move upwards in a parallel shift
total cost line pivots upwards
revenue line pivots upwards
If there was a fall in fixed costs what impact would this have on the break-even output?
smaller output is necessary to break-even
break-even is achieved at a lower level of output
greater output necessary to break-even
break-even is reached at a higher level of output
On a break-even chart, what line does the total revenue line meet at the break-even point?
The fixed cost line
The variable cost line
The total cost line
Semi variable cost line
If average variable cost is £10, and average selling price is £25, then what is contribution?
£35
£15
£-15
£40
If the average variable costs £10, average selling price is £25 and fixed costs are £60,000, then what is the break-even output?
5000
7000
6000
4000
What is a business doing when it sells output beyond the break-even point?
Making a loss
Making a profit
Making neither a profit or loss
It is not possible to tell from the graph
What is the break-even point in units for company where total fixed costs are £275,450
selling price per units £16
variable cost per unit is £14.75
220,360
183,633
150,300
225,120
What is the margin of safety?
The difference between units sold and the break-even amount
The margin between units and sales
The margin between each break-even point
The margin between profit and loss
The break even level of output for a firm is 800 units and it is currently making 950 units. What is its margin of safety?
150 units
250 units
300 units
1750 units
Two of these formulas are correct for working out the break-even point. Which two
Fixed Costs / Contribution Margin per unit
Total Costs - Fixed Costs x variable costs per unit
Fixed Costs / Sales price per unit - variable costs per unit
Contribution Margin per unit / Fixed Costs
Which of the following is a limitation of break-even?
It helps projected sales
It is based on multiple products
It assumes all units produced are sold.
It considers stock wages
We are going to manufacture Whats-Its. The Whats-It machine costs £4000.It also costs £5 for materials and labour for each Whats-It. We are planning to sell our Whats-Its for £12 each. How many Whats-Its must we sell in order to breakeven?
571.42
572
570. 63
571
Purpose of a budget is to:
identify cash in and out flows of a business
determine the actual cash on hand for a previous period
identify revenue earned for the current period
determine expenses incurred for the current period
What is one advantage of preparing a cash budget?
Higher credit rating
Knowing when cash my be idle & can therefore be invested
It makes doing the business annual tax return quicker
It is quick and easy to do
What are the two types of budget we've studied
Temporary
Futuristic
Historical
Zero-based
If a business's costs exceeds it sales revenue, it will experience a ........?
loan
profit
loss
debt
How do you calculate Gross Profit Margin?
gross profit / sales (revenue) x 100
gross profit x sales (revenue) / 100
gross profit / sales (revenue) / 100
gross profit x sales (revenue) x 100
How do you calculate Net Profit Margin?
net profit / sales (revenue) x 100
net profit x sales (revenue) / 100
net profit / sales (revenue) / 100
net profit x sales (revenue) x 100
A Business Has The Following:
Fixed Assets = £6000
Current Assets = £2000
Inventory = £1000
Current Liabilities = £500
Calculate It's Current Ratio
4 : 1
25 : 1
2 : 1
5 : 1
1 : 5
A Business Has The Following:
Fixed Assets = £6000
Current Assets = £2000
Inventory = £1000
Current Liabilities = £500
Calculate It's Acid Test Ratio
4 : 1
25 : 1
2 : 1
5 : 1
1 : 5
A Business Has The Following:
Fixed Assets = £20,000
Current Assets = £4,620
Inventory = £3,321
Current Liabilities = £2,000
Calculate It's Acid-Test Ratio
0.65 : 1
1.45 : 1
0.45 : 1
45 : 1
54 : 1
A Business Has The Following:
Fixed Assets = £12,050
Current Assets = £13,500
Inventory = £6,040
Current Liabilities = £7,000
Calculate It's Acid-Test Ratio
1.07 : 1
1.11 : 1
0.93 : 1
1.02 : 1
0.99 : 1
What is the correct definition of Positive Liquidity
A business has enough cash to pay off their liabilities.
A business does not have enough cash to pay off their liabilities.
A business has enough fixed assets to sell in order to pay off their current liabilities
A business has a greater amount of fixed assets than current assets.
A business has more money going going to creditors than it is receiving from debtors.
What is the correct definition of Poor Liquidity
A business has enough cash to pay off their liabilities.
A business does not have enough cash to pay off their liabilities.
A business has enough fixed assets to sell in order to pay off their current liabilities
A business has a greater amount of fixed assets than current assets.
A business has more money going going to creditors than it is receiving from debtors.
Identify the correct formula for the current ratio.
Current Liabilities / Current Assets
Current Assets / Current Liabilities
Current Liabilities / (Current Assets - Inventory)
(Current Assets - Inventory) / Current Liabilities
Identify the correct formula for the Acid Test Ratio.
Current Liabilities / Current Assets
Current Assets / Current Liabilities
Current Liabilities / (Current Assets - Inventory)
(Current Assets - Inventory) / Current Liabilities
A business has a Acid Test ratio of 0.9 : 1
What does this mean.
For every £1 of current assets they have £0.90 of current liabilities.
For every £1 of current liabilities they have £0.90 of current assets.
For every £1 of current assets less inventories they have £0.90 of current liabilities.
For every £1 of current liabilities they have £0.90 of current assets less inventories.
A business has a acid-test ratio of 1.3 : 1
What does this mean.
For every £1 of current assets they have £1.30 of current liabilities.
For every £1 of current liabilities they have £1.30 of current assets.
For every £1 of current assets less inventories they have £1.30 of current liabilities.
For every £1 of current liabilities they have £1.30 of current assets less inventories.
The maximum output that a process or facility could achieve under normal conditions is called:
Capacity utilisation
Peak Capacity
Effective Capacity
None of the above
Operation at peak capacity involves:
Sustained low utilisation rates
Marginal methods of production
Maximum output under normal conditions
None of the above
A possible disadvantage of operating at very high levels of capacity utilisation is:
Labour productivity is low
Less able to respond to sudden increases in demand
Break-even output will be higher
Cannot invest in new technology
A business policy of permanently reducing production capacity is known as:
Outsourcing
Rationalisation
Redundancies
Depreciation
What is the capacity utilisation rate for a factory that can produce 20,000 units per month with an actual output of 18,000 units per month
90%
80%
111%
20%
a factory that can make 6000 units per week but actually produces 4500 units has a capacity utilisation of
25%
75%
40%
60%
If a business is working at 60% capacity utilisation and is producing 9,000 units, what is its capacity
6,333 units
20,000 units
15,000 units
9,000 units
A disadvantage of a business having significant spare capacity is that:
Higher return on investment in fixed assets
Employees may become de-motivated and bored
Business can respond to sudden increases in demand
Fixed costs are a low percentage of total costs
Which of these could be a useful measure of production efficiency?
Overheads per employee
Output per machine or employee
Total direct production costs
Sales returns per week
When is the capacity utilisation rate for a business likely to fall?
During a prolonged industrial dispute
When there is a sudden increase in demand
During peak trading sessions in the year
When employees are asked to work overtime
Which of the following might result in increased spare capacity?
A major competitor goes bust
Successful response to a marketing campaign
Closure of a surplus production facility
A major product reaches end of product life cycle
What is over-utilisation
When you buy too many raw materials
When you buy too many capital goods
When there are too many workers to employ
When resources are being stretched uncomfortably
How do train companies improve capacity utilisation
Serve food onboard
Charge more during peak times and less during off peak
Run more regular services
Buy more trains
What is the formula for capacity utilisation
Output per worker/Total output
(Maximum possible output/Current Output) *100
(Current output/Maximum possible output) *100
Total output/Output per worker
What is the purpose of performing a SWOT Analysis? (CRE)
Identifies internal and external factors that may affect the business future performance.
Access a organisations performance
Evaluates whether the business venture is a good idea.
Gives the management team a broader view on the potential opportunity
Mr. Jonas discovered that a new competitor has entered the market. At which stage of the SWOT analysis would this discovery probably be made? (ANA)
Analysis of strengths
Analysis of weaknesses
Analysis of opportunities
Analysis of threats
Due to an increase in disposable income (purchasing power) over the last six years, local residents have more money to spend on leisure activities.
Strength
Weakness
Opportunity
Threat
Which option below lists the external factors of a SWOT analysis?
Strengths and Opportunities
Weaknesses and Threats
Weaknesses and Strengths
Threats and Opportunities
Great customer service would be considered a (n)
Strength
Weakness
Opportunity
Threat
When your competitors have access to better channels of distribution, that would be considered a(n)
Strength
Weakness
Opportunity
Threat
Identify an opportunity from the options below:
New market opened up
Minimum wage so higher wages have to be paid
Negative publicity
Good financial situation
Identify a weakness from the following
Overseas demand for a product
Falling number of customers within specific age group
Making a profit
Poor quality goods
Identify a threat from the list below:
New market opened up
Competitor opening a new outlet next to your business
Poor staff training
Expansion overseas
Which of the following is not an element of Porter’s 5 Forces Model?
The firm’s macroeconomic environment.
The firm’s existing competition.
The bargaining power of suppliers.
The potential competition from new entrants.
In Porter’s five forces model, conditions are more favourable for firms within an industry if:
Buyer power is high
Supplier power is high
Entry threat is low
Substitute threat is high
People appear to be more health conscious. This may create opportunities for some businesses e.g., fitness centres. Which factor is this?
Economical Factors
Social Factors
Environmental Factors
Political Factors
Technological Factors
An increase in Minimum wage may impact a business because…
It will increase profits
It will increase total costs of the business
It will increase consumer products
It will increase customers
Porter’s 5 Forces model helps to do what?
analyze the potential attractiveness and profitability of specific company
analyze the potential attractiveness and profitability of any start-up at any time
analyze the potential attractiveness and profitability of specific industry
analyze the potential attractiveness and profitability of IT start-ups
In case there are many (potential) suppliers, this means that...?
you should regularly change the suppliers
most probably the suppliers are not powerful
most probably the suppliers are powerful
you should never change the suppliers
11) The price of prescription medicine is high, partly because when someone is sick there is no real alternative to buying medicine if they want to get better. Which of Porter's five forces explains how this aspect of the prescription medicine industry helps keep profitability high?
A) Rivalry Among Existing Firms
B) Threat of New Entrants
C) Threat of Substitutes
D) Bargaining Power of Buyers
E) Bargaining Power of Suppliers
9) In general, industries are more attractive when the ________.
A) majority of the threats are high
B) majority of the threats are low
C) threat of each of the forces is neutral-neither low nor high
D) threat of each of the five forces is high
E) threat of each of the five forces is low
12) Which of Porter's five forces is most closely associated with the concept "barrier to entry"?
A) Bargaining Power of Suppliers
B) Rivalry Among Existing Firms
C) Threat of New Entrants
D) Bargaining Power of Buyers
E) Threat of Substitutes
When calculating moving averages with an even number of seasons, what should be used? (Unless otherwise stated)
Centring
Rounding
Median smoothing
Cyclical data smoothing
Using the table shown, calculate the value of the three year moving average in 1965
2
3
1.5
2.5
Using the table shown, calculate the value of the three year moving average in 2005
12
13
12.5
11.5
Using the table, find the 3-point moving average y-value for t=2
61
62
63
64
Using the table, find the 5-point moving average y-value for t=3
66.4
65.4
62.4
64.5
Using the table, find the 4-point centred moving average y-value for t=3
60.25
48.2
241
60.6
Define the term trend in reference to time series data.
The general tendency of the data to increase or decrease during a long period of time
The repetitive and predictable movement around the trend line in one year or less.
The oscillations that occur over long periods about the trend line or curve
The movements that appear irregularly and generally during short periods. Irregular variations do not follow a particular model and are not predictable.
Define the term cyclical fluctuations in reference to time series data.
The general tendency of the data to increase or decrease during a long period of time
The repetitive and predictable movement around the trend line in one year or less.
The oscillations that occur over long periods about the trend line or curve
The movements that appear irregularly and generally during short periods. Irregular variations do not follow a particular model and are not predictable.
Define the term random fluctuations in reference to time series data.
The general tendency of the data to increase or decrease during a long period of time
The repetitive and predictable movement around the trend line in one year or less.
The oscillations that occur over long periods about the trend line or curve
The movements that appear irregularly and generally during short periods. Irregular variations do not follow a particular model and are not predictable.
Using the table, find the 4-point centred moving average y-value for t=4
62.125
49.7
248.5
63.16
When are quantitative sales forecasts more reliable (pick two)
The forecast is for a short period of time
They are constantly revised to take into account new data
When the market is fast changing
When there is little market research data available
When are quantitative sales forecasts more reliable (pick two)
The forecast is for a long period of time
They are kept the same when new data comes to light
When the market is slow changing
When there is lots of market research data available
When are quantitative sales forecasts more reliable (pick two)
The forecast is for a long period of time
They are kept the same when new data comes to light
Those preparing the forecast have a good understanding of how to use the data to produce a forecast
Those preparing the forecast have a good knowledge of the market and can adjust forecasts to consider other variables.
The sales of a new popular ice-cream flavour in a beach resort. Choose the true statement.
positive secular trend
seasonal pattern
cyclic pattern
random pattern
The number of daily births in a particular country hospital over a period of 10 days.
negative secular trend
seasonal pattern
cyclic pattern
random pattern
This formula calculates...
Gearing Ratio
Return on Capital Employed (ROCE)
Current ratio
Acid test ratio
This formula calculates...
Gearing Ratio
Return on Capital Employed (ROCE)
Current ratio
Acid test ratio
A higher gearing ratio means more loans compared to share capital will mean the business will be considered riskier by creditors.
True
False
A highly geared company is more secure as it doesn't have to pay much interest on loans
True
False
What value would be considered good for return on capital employed (ROCE)
at least 10%
at least 20%
at least 30%
One that is higher than its competitors.
A common feature of a business with high gearing is...
Tend to operate in the secondary sector
Shareholders suffer lower dividends per share
More difficult to raise additional bank finance
Profits increase when interest rates rise
An alternative name for gearing is
Liquidity
Leverage
Equity
Capital Intensity
Which of the following would reduce gearing?
Offering customers longer trade credit terms
Reducing inventories to lower the bank overdraft
Launching a new product portfolio
Issuing new share capital to pay off long-term debt
A good reason for a firm to operate with high gearing is where...
The firm experiences significant changes in profits and cash flow
Shareholders consider the business to be high risk
The firm has strong liquidity and predictable future cash flows
Interest rates are expected to rise in the long-term
Each of these actions should reduce gearing, except one. Which is the odd one out?
Raise finance through a share issue
Convert the bank overdraft into a bank loan
Convert part of a bank loan into shares
Retain profits rather than pay out as dividends
A reason why highly-geared firms suffer during an economic downturn is:
Profits and cash flows fall but interest costs remain high
Share prices fall as the stock market declines
Shareholders are less likely to accept lower dividends
Interest rates fall due to higher unemployment
In recent years highly-geared businesses in the UK have benefitted from
Easy availability of bank loans
High share prices
Understanding bank managers
Very low interest rates
A firm has sales of £4m and an operating profit margin of 25%. If capital employed is £5m what is the ROCE
17.5%
20%
25%
40%
Other things being equal, which THREE of the following would result in an improved ROCE?
Reduced overhead costs
A higher gross profit margin
A reduction in corporation tax
A reduction in working capital
Higher shareholder dividends
Which TWO of the following are excluded from the profit used to calculate ROCE?
Raw materials
Business overheads
Taxation
Distribution costs
Interest costs and income
A possible reason why a firm's ROCE may be understated is that
A one-off profit had been earned
Fixed assets such as property are under-valued
Year-end stocks are lower than normal
The firm pays a low rate of tax
How should ratios be compared so that the comparisons are most useful. Select all that apply
With historical results from the same company.
With firms with different working capital needs and profit margins
With the most profitable firms in the world
With firms with similar working capital needs and profit margins
What is one problem of using the balance sheet for ratio analysis
The data in it is only estimates
It only shows a snapshot of the firms assets and liabilities on one day
The data is very inaccurate
It doesn't take into account current assets and liabilities
Which of the following are reasons why firms may engage in window dressing (artificially manipulating businesses accounts). Select all that apply
Managers may want praise and rewards.
A business is not looking for any new finance so wants to look good.
If the owners want to sell, then a better financial picture will increase the price they are likely to get.
Worsening the financial picture may lower the amount of tax paid.
