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WorksheetsBTEC Level 2 Unit 2 Finance quiz
Total questions: 100
Worksheet time: 1hrs 25mins
What is the formula to calculate profit?
Profit = Revenue * Cost
Profit = Revenue - Cost
Profit = Revenue + Cost
Profit = Revenue / Cost
What is revenue?
Total amount of money earned by a company from its shareholders.
Total amount of money generated by a company from its business activities.
Total amount of money borrowed by a company from its creditors.
Total amount of money spent by a company on its business activities.
What are fixed costs?
Costs that are only incurred once and do not change.
Expenses that increase with the level of production or sales.
Variable costs that fluctuate based on production or sales.
Expenses that do not change regardless of the level of production or sales.
What are variable costs?
Expenses that remain constant regardless of the activity or volume of a company's business.
Expenses that are unrelated to the activity or volume of a company's business.
Expenses that are incurred only once in a company's lifetime.
Expenses that change in proportion to the activity or volume of a company's business.
What is the formula to calculate total costs?
Total Costs = variable 1 + variable 2
Total Costs = Cost1 - Cost2 - Cost3
Total Costs = fixed 1 + fixed 2
Total Costs = fixed + variable
Budgeting and Forecasting: What is the purpose of creating a budget for a business?
To waste resources and money
To confuse employees and stakeholders
To plan and allocate resources effectively, set financial goals, and monitor performance.
To make the business look unprofessional
Financial Statements Analysis: What is the purpose of a statement of financial position (balance sheet)?
To display the company's employee benefits and compensation
To highlight the company's environmental impact and sustainability efforts
To show the company's marketing strategy and sales performance
To provide a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and capital
Cash Flow Management: Why is it important for a business to manage its cash flow effectively?
To waste money and resources
To ensure enough liquidity to meet financial obligations and invest in growth opportunities.
To limit the business's growth potential
To create financial instability
Cash Flow Management: Explain the difference between cash inflow and cash outflow in a business.
Cash inflow is money leaving the business, while cash outflow is money coming into the business.
Cash inflow is the total expenses of the business, while cash outflow is the total revenue.
Cash inflow is money coming into the business, while cash outflow is money leaving the business.
Cash inflow is the amount of debt the business owes, while cash outflow is the amount of profit the business makes.
What is the breakeven point in a business context?
When revenue is greater than expenditure
When income and expenditure are equal
When revenue is less than expenditure
When a business starts making a profit
What is the margin of safety in a breakeven chart?
The difference between actual sales and breakeven sales
The total fixed costs
The variable cost per unit
The selling price per unit
What is the significance of the breakeven point?
It is the point where total revenue equals total costs
It is the point where profit is maximized
It is the point where variable costs are minimized
It is the point where fixed costs are zero
What happens to the profit level if the number of sales required to break-even increases?
The profit level increases
The profit level remains the same
The profit level falls or becomes a loss
The profit level is unaffected
What is the effect of increasing variable costs on the breakeven point?
The breakeven point becomes irrelevant
The breakeven point decreases
The breakeven point increases
The breakeven point remains unchanged
What is the primary purpose of conducting a breakeven analysis?
To calculate the point at which a business neither makes a profit nor a loss
To find the maximum production capacity
To determine the optimal number of employees
To assess customer satisfaction levels
Revenue (minus) _____
What is an example of a start-up cost for a pizzeria?
Pizza oven
Delivery service
Online ordering system
Franchise fee
What must a pizza restaurant pay for regardless of the number of customers?
Ingredients for pizza
Gas to run the pizza ovens
Seasonal staff wages
Marketing campaigns
Which of the following is NOT a running cost for a pizza restaurant?
Gas for the pizza oven
Flour for the pizza dough
Buying a new oven
Water for cleaning
What is the relationship between variable costs and production levels?
Variable costs decrease as production increases
Variable costs remain constant regardless of production
Variable costs increase as production increases
Variable costs are unrelated to production levels
Which of the following would NOT be considered a variable cost for a pizzeria?
Cheese for pizzas
Dough for pizza bases
Monthly lease payment
Tomato sauce for pizzas
What is the role of investment income for businesses?
It reduces operational costs
It comes from people buying shares
It increases employee wages
It decreases product prices
Which of the following is a variable cost?
Rent and business rates
Utility bills
Staff wages
Telecommunication links
Which of the following is an example of a fixed cost for a pizzeria?
Cost of cheese
Monthly rent
Cost of toppings
Hourly wages for staff
What is the impact on profit if a business reduces its fixed costs?
Profit becomes negative
Profit increases
Profit remains the same
Profit decreases
What is a fixed cost?
Costs that increase directly with changes in production or output.
The costs directly involved in making one product.
Costs that remain the same regardless of how many items you make or sell.
Costs other than those involved in making the product.
What is a total cost?
Costs that increase directly with changes in production or output.
The costs directly involved in making one product.
Costs that remain the same regardless of how many items you make or sell.
Costs other than those involved in making the product.
Fixed Costs + Variable Costs
Which of the following would be a fixed cost of a wood yard?
Petrol for the van
Wood
Electricity
Salary of office staff
How would you describe a start-up cost?
These are the variable costs of a business.
These are the costs of a business.
These are costs which must be met after
the business can start selling any products.
These are costs which must be met before
the business can start selling any products.
Select one type of expenditure for a shoe shop.
Taking out a bank loan.
Paying wages to staff.
Selling shoes to customers.
Displaying accessories.
Identify one source of revenue for a business
Electricity bills paid for running the business.
Wages received by staff for work they do.
Payments received from customers
Purchase of inventory.
Which 2 are an example of an external sources of finance?
Owners' Funds
Sale of assets
Retained profits
Bank loan
Overdraft
James runs a business making wicker chairs. He estimates the following monthly costs: Variable costs of £30 for each chair he makes fixed costs of £120. James make Six chairs in February.
Work out James' total costs for February
180.00
120.00
300.00
80.00
A business has the following monthly costs:
Fixed Costs = £400
Variable Costs £10 per item
What are the variable costs if they make 100 items?
£10
£100
£1000
£10000
£400
Which of the following is a long term liability
Overdraft
Accounts Payable
Mortgage
Goodwill
Which 2 of these are examples of start up costs for a small supermarket?
Stock
Buy a shop
Pay wages
Pay a recruitment agency to recruit staff
If Sam's Sandwiches use 25p of material for each sandwich, what will be their variable costs for 10 sandwiches
10 x 0.25 = £2.50
2.5 x 10 = £25
25 x 10 = £250
0.25/10 = 2.5p
Gross profit is calculated by...
Revenue - Total Costs
Revenue + Variable Costs
Revenue - Cost of Sales
Revenue - Fixed Costs
How do you calculate net profit?
Gross profit - expenses
Revenue - total costs
Gross profit - variable costs
Revenue - indirect costs
Revenue = 1000
Cost of Goods Sold = 200
Expenses = 300
Gross Profit = ?
800
500
700
300
What is the purpose of an income statement?
calculate the bank balance
calculate net assets
calculate sales
calculate net profit
Which of the following means money spent?
income
expense
net income
gross income
Which of the following means money received?
net loss
net gain
insurance
income
When expenses are greater than income?
expense
net loss
net income
net gain
Total profit made before all remaining expenses have been deducted:
Financial Ratios
Gross Profit
Net income
Operating Statement
Income = 1000
Cost of Goods Sold = 200
Expenses = 300
Gross Profit = ?
800
500
700
300
Income = 1000
Cost of Goods Sold = 200
Expenses = 300
Net Profit = ?
800
500
700
300
Net Profit = 500
Income = 2000
Expenses = 1000
Cost of Goods Sold = ?
1500
1000
3000
500
Which of these might appear on a statement of financial position (balance sheet)?
What is the purpose of a cash flow forecast?
To calculate profit or loss
To find out whether a business has enough cash to pay their bills
To find out when customers are going to pay their invoices
To see if the business will break even
Which of the following are cash inflows?
Loan
Grant
Sales Revenue
Loan repayments
Which of the following are cash outflows?
Wages
Rent received
Insurance
Tax rebate
How do you calculate net cash flow?
Inflows - Outflows
Outflows - Inflows
Inflows + Outflows
Revenue - Total costs
What is the opening balance on a cash flow forecast?
Opening balance is what the business has left at the end of the month
Opening balance is the same amount in the bank as the opening balance from the previous month
Opening balance is cash in the bank at the beginning of the month and is the same as the closing bank balance from the previous month
Opening balance is the same as break even
How do you calculate closing balance?
Net cash flow + opening balance
Net cash flow - opening balance
(net cash flow / opening balance) x 100
Net cash flow x opening balance
If a business has total inflows of £250 and total outflows of £100, what is their net cash flow?
£150
£350
40%
0.4
Profitability ratios include :
net profit margin
gross profit margin
stock (inventory) turnover
revenue margin
Which ratio assesses liquidity ?
operating profit margin
current ratio
gearing
stock turnover
Current ratio =
current assets x current liabilities
current assets + current liabilities
current assets / current liabilities
current assets - current liabilities
Working Capital formula?
Current assets-current liabilities
Current assets-non current liabilities
stock +prepaid expense
Which is an example of an external source of finance?
Owners' Funds
Sale of assets
Retained profits
Bank loan
What is the main reason for using accounting ratios?
To measure the financial performance of the business.
To calculate taxes accurately.
To track employee attendance.
To determine the weather forecast.
How is Gross Profit Margin calculated?
Gross Profit/Sales Revenue x 100
Current Assets - Stock / Current Liabilities
Net Profit/Sales x 100
Total Expenses/Sales x 100
Which ONE is not the major items on an income statement?
Sales revenue
Cash inflows
Cost of sales
Gross profit
How easy it is for a business to pay back its short term debts is called?
Liability
Insolvent
Liquidity
The two basic measures of liquidity are:
inventory turnover and current ratio
current ratio and liquid capital ratio
gross profit Ratio and operating ratio
current ratio and average collection period
What is the net profit margin formula?
Net profit / other expenses x 100
Net profit / Cost of sales x 100
Gross profit / Total revenue x 100
Net profit / Total revenue x 100
What does the net profit margin tell us?
How effectively a business turns operating expenses into profits
How effectively a business turns cost of sales into profits
How effectively a business turns costs into profits
How effectively a business turns sales into profits
Ronald McDonut sells 150 cakes a day for £2.50 each and it costs him £1.75 per donut to produce them. His total sales revenue is
£2.50 per unit
£112.50
£375
£262.50
If a business wants to increase its profits then it should aim to
Lower its costs and lower its revenue
Raise its costs and lower its revenue
Raise its costs and raise its revenue
Lower its costs and raise its revenue
