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WorksheetsIGCSE Section 5: Financial Information & Decisions
Total questions: 30
Worksheet time: 10mins
What is start-up capital in a business?
The money spent on day-to-day expenses like wages and rent
The money needed to pay day-to-day running expenses
The initial capital used to buy fixed and current assets before trading
The money spent on long-term assets like vehicles and machinery
What is the advantage of using retained profit as a source of finance?
It is a permanent source of capital and no need to repay the money to shareholders
It is available to the firm quickly and no interest has to be paid
It provides immediate cash to the business and the business doesn't have to handle debt collecting
It does not have to be repaid and no interest has to be paid
What is the disadvantage of using owner's savings as a source of finance?
It increases the risk taken by the owners
It makes better use of capital tied up in the business
It reduces costs of inventory holding
It does not become debt for the business, unlike a loan
What is the advantage of issuing shares for a limited company?
The ownership of the business will change hands
The company doesn't have to repay the money to shareholders
The business can get very low rates of interest on their loans
The bank can ask for the overdraft to be repaid at a short notice
What is the disadvantage of bank loans as a source of finance?
Need to pay interest on the loan and it has to be repaid after a specified length of time
The debt factor will get a percent of the debts collected and the business doesn't get all of their debts
The bank can claim your property if the loan isn't repaid
Quick to arrange a loan and can be for varying lengths of time
What is the advantage of using trade credits as a source of finance?
The business can decide to buy the asset at the end of the leasing period
The business doesn't have to handle debt collecting
The bank can ask for the overdraft to be repaid at a short notice
No interests, repayments involved
What is the advantage of using hire purchase as a method of finance?
The firm doesn't need a large sum of money to use the asset
The firms doesn't need a large sum of cash to acquire the asset
The firm doesn't need to repay the money to shareholders
The firm doesn't need to handle debt collecting
Why is cash important to a business?
To increase business assets
To improve long-term investments
To cover short-term/day-to-day costs
To enhance employee benefits
What of the following constitutes a "cash inflow" for a business?
Repaying loans
Purchasing fixed assets
Paying creditors
Sales revenue
What is an example of a "cash outflow" for a business?
Purchasing raw materials
Receiving payments from debtors
Borrowing money from external sources
Selling shares
What is the purpose of a cash flow forecast for a business?
To calculate the profit of the business
To estimate the expected cash inflows & outflows for a business
To determine the market share of the business
To assess the company's long-term investments
How is the closing cash/bank balance for a month calculated in a cash flow forecast?
Opening cash balance minus net cash flow
Net cash flow plus opening cash balance
Total cash inflow minus total cash outflow
Total cash outflow plus opening cash balance
Which of the following is NOT a method for overcoming short-term cash flow problems?
Increase bank loans
Delay payments to suppliers
Cancel larger purchases
Develop more products
How do we calculate PROFIT?
(Gross Profit/Sales Revenue) x 100
Sales Revenue – Total Costs
Cash Inflows/Cash Outflows
Sales Revenue - Cost of Sales
Which of the following is NOT a true statement about profit?
Profit is a reward for risk-taking
Profit is a source of finance
Profit is an indicator of success
Profit is the same as cash flow
What does the term "Gross Profit" represent in an income statement?
Total variable cost of production
Sales Revenue minus Expenses
Total sales minus total fixed costs
Sales Revenue minus Cost of Sales
How do we calculate Retained Profit for the year?
Profit after Tax – Dividends
Gross Profit - Tax
Profit/Tax - Dividends
Profit before tax - Dividends
Why would a manager use an income statement?
To calculate the tax they are owed
To compare to previous years and set goals/make decisions
To decide if the business is a good investment
To decide if the business should be given a loan
Why would a potential investor use an income statement?
To calculate the tax they are owed
To compare to previous years and set goals/make decisions
To decide if the business is a good investment
To decide if the business should be given a loan
What is the purpose of the balance sheet in a business?
To record the daily income and expenses
To calculate the total revenue over a financial year
To show the value of assets and liabilities at a specific time
To determine the profitability of individual products
How is working capital calculated?
Current Assets - Current Liabilities
Current Assets / Current Liabilities
Current Assets + Current Liabilities
Current Liabilities x Current Assets
'Profit/Capital Employed x 100' is what calculation?
Gross Profit Margin
ROCE
Current Ratio
Acid Test Ratio
'(Current Assets - Inventory) / Current Liabilities = x:1' is what calculation?
Gross Profit Margin
ROCE
Current Ratio
Acid Test Ratio
'Profit/Sales Revenue x 100 ' is what calculation?
Profit Margin
ROCE
Current Ratio
Acid Test Ratio
What is Liquidity?
The total assets of a business
The ability of a business to meet its short-term obligations with available cash
The long-term investments made by a business
The profitability of a business over a financial year
What is the difference between revenue and profit?
Revenue is the amount of money a business makes before expenses, while profit is the amount of money a business makes after expenses.
Revenue is the amount of money a business makes after expenses, while profit is the amount of money a business makes before expenses.
Revenue is the amount of money a business spends on expenses, while profit is the amount of money a business makes.
Revenue is the amount of money a business makes, while profit is the amount of money a business owes.
Which of the following is NOT a type of profit?
Operating Profit
Assumed Profit
Gross Profit
Net Profit
What is the statement of financial position also known as?
Cash flow statement
Profit and loss statement
Balance sheet
Income statement
Which of the following is NOT an advantage of using DEBT as a source of finance?
Owners retain full control
Relatively easy to set up
Profits not shared with lender
Benefit from shared ownership & shared risk
What is a reason why businesses need finance?
To increase customer satisfaction
To reduce competition
To cover operational costs
To eliminate risk
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