Unit 1 Financial Planning and Analysis

Question 1

Which of the following is a disadvantage of leasing?

Accepted Answer

More expensive in the long-run

Question 2

What is the difference between trade receivables and trade payables?

Accepted Answer

Receivables = money owed to suppliers...payables = money owed to suppliers

Question 3

What is meant by a contribution analysis?

Accepted Answer

Process of investigating the effect of changes in selling price

Question 4

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

Accepted Answer

Utilities

Question 5

Selling shares, loans, leasing, introduction of new partners and government grants are examples of external finance

Accepted Answer

True

Question 6

Which of the following explains what is meant by gross profit margin?

Accepted Answer

The relationship between gross profit and sales revenue as a %

Question 7

Break-even is the level of output at which the business is making neither a profit nor a loss.

Accepted Answer

True

Question 8

The current ratio (current assets/current liabilities) will show which of the following?

Accepted Answer

Whether there is a threat to the short term survival of the business

Question 9

Which of the following is a disadvantage of share capital?

Accepted Answer

Possible loss of ownership

Question 10

The formula for profit is Total revenue (TR) - Total costs (TC)

Accepted Answer

True

Question 11

Which of the following is the correct definition of limited liability?

Accepted Answer

Business debt is separate from the owners personal debt/finances

Question 12

Which business is most likely to have the highest inventory turnover period?

Accepted Answer

Car Sales

Question 13

Which of the following is the correct definition of Net Cash Flow?

Accepted Answer

The difference between cash inflows and cash outflows

Question 14

Which of the following are weaknesses of interpreting financial ratios?

Accepted Answer

Can't consider qualitative factors such as CSR, Need to be considered in the context of corporate and functional objectives

Question 15

Which is an example of a non-current asset?

Accepted Answer

Premises

Question 16

Ideally, the gearing ratio should be below 50%

Accepted Answer

True

Question 17

Semi-variable costs are costs that are partly fixed and partly variable e.g. basic salary + commission

Accepted Answer

True

Question 18

Which of the following is an advantage of using owner's funds to finance a business

Accepted Answer

Don't have to repay which will help cash flow, No interest charges which helps to reduce costs

Question 19

Raw materials are an example of cost of sales for a baking business?

Accepted Answer

True

Question 20

What is meant by the term surplus?

Accepted Answer

The reward for not-for-profit enterprises enjoyed when income < expenditure

Question 21

Which is the correct formula for contribution per unit?

Accepted Answer

Selling price - variable cost

Question 22

Unlimited liability is when the sole trader and the business have the same legal identity

Accepted Answer

True

Question 23

Leasing is a contract that allows the renting of assets from another party

Accepted Answer

True

Question 24

What is meant by gross profit?

Accepted Answer

Sales revenue - cost of sales

Question 25

Which of the following are the correct features of a partnership?

Accepted Answer

2 or more people, unlimited liability, more capital available,

Question 26

Which of the following is an example of a start-up cost?

Accepted Answer

Premises

Question 27

Which of the following is a feature of a private limited company?

Accepted Answer

Limited liability, shares sold privately to family and friends

Question 28

What is meant by an expenditure budget?

Accepted Answer

A limit placed on the amount spent in a given period

Question 29

Market share can be calculated by sales of one firm/total market sales x 100

Accepted Answer

True

Question 30

What is meant by market size?

Accepted Answer

The total value or volume of sales in the market. Measured in money or unit

Question 31

Which of the following is likely to be a stakeholder perspective of the suppliers?

Accepted Answer

Solvency and activity ratios e.g. trade payables payment period

Question 32

Which of the following is a feature of a community interest company?

Accepted Answer

Operate for the wellbeing of their members: customers, employees, suppliers

Question 33

Which of the following is a use of break even?

Accepted Answer

Helps to make decisions, Can assess the impact of changing variables e.g. lower selling price, Show to potential investors to illustrate ability to make profit, Set targets for minimum sales

Question 34

How can ratios be categorised?

Accepted Answer

Profitability, solvency and activity

Question 35

What is meant by operating profit?

Accepted Answer

A business' profit after all other expenses have been deducted. GP-EXPENSES

Question 36

Which of the following features of being a sole trader?

Accepted Answer

Unlimited liability, more flexibility, less conflict with other owners

Question 37

What is meant by an adverse variance?

Accepted Answer

The variance has a negative impact on profits andis therefore seen as bad

Question 38

Liquidity is a measure of a businesses ability to turn assets into cash

Accepted Answer

False

Question 39

Which is the most appropriate financial objective for a business which has borrowed a loan and sells on credit?

Accepted Answer

Ensuring sufficient cash resources

Question 40

Contribution per unit is the level of output at which the business is making neither a profit or a loss.

Accepted Answer

False

Question 41

Which is a limitation of break-even?

Accepted Answer

Even fixed costs can vary in reality, especially in the long run

Question 42

Which is the right definition of capital expenditure?

Accepted Answer

Spending by a business on a fixed asset e.g. machinery

Question 43

Which of the following is a limitation of a cash flow forecast?

Accepted Answer

It may be informed by market research

Question 44

A what-if analysis is the process of forecasting how outcomes will change based on changes in variables

Accepted Answer

True

Question 45

The purpose of a budget is to provide a quantifiable target, that can be communicated to interested parties and measured

Accepted Answer

True

Question 46

What is the calculation for working capital?

Accepted Answer

Current assets - current liabilities

Question 47

What is unlimited liability?

Accepted Answer

The debt of the owner and the debt of the business are not separate.

Question 48

Which of the following is most likely to be a stakeholder perspective made by the owner of a business?

Accepted Answer

Return on capital employed

Question 49

Market information could include market growth, sales growth, market size/share and industry research

Accepted Answer

True

Question 50

There are 4 types of budgets, income, expenditure, profit and surplus.

Accepted Answer

True

Question 51

Activity ratios measure a businesses relationship between operating profit and sales revenue

Accepted Answer

False

Question 52

Which of the following is the formula for total revenue?

Accepted Answer

Selling price x quantity sold

Question 53

Which of the following are disadvantages of being a public limited company?

Accepted Answer

Open to more public scrutiny

Question 54

Which of the following is a purpose of a break-even analysis?

Accepted Answer

Can calculate the level of profit/loss at different levels of output, Helps an entrepreneur identify whether an idea is viable or not

Question 55

What is meant by market trends?

Accepted Answer

Identifying patterns in the actions of buyers and sellers in a market.

Question 56

Which of the following is the definition of cash reserves?

Accepted Answer

Cash available to the business to meet day-to-day expenses

Question 57

Which of the following is the formula for total costs?

Accepted Answer

Fixed costs + total variable costs

Question 58

Which of the following is a drawback of using budgets?

Accepted Answer

Opportunity cost of the manager's time

Question 59

Why does the acid test ratio (current assets - inventories/current liabilities) not include stock?

Accepted Answer

Stock may be the hardest current asset to turn into cash

Question 60

ROCE shows how much a business receives in profit for each £1 they invest as a %

Accepted Answer

True

Unit 1 Financial Planning and Analysis

Questions 60

Unit 1 Financial Planning and Analysis

Questions 60