Theme 2 re-cap

What is asset?

• An item of property owned by a person or company
• An item owned by a business that lasts for several years.

Which ONE of the following items would be found in the income statement of a business?

• equipment

• investments

• gross profit

• accounts payable

Profit is important to businesses because:

• it improves businesses, cash balances
• it can be used to measure business size
• it is a measure of businesses, success
• businesses need to pay taxes to the government

Payment made for the use of borrowed money is called

• Financial Institution
• Creditors
• Interest
• Secured

What is the purpose of budgeting in financial planning?

• Budgeting restricts financial freedom and creativity

• Budgeting helps allocate resources effectively, track expenses, set financial goals, and ensure financial stability.

• Budgeting is only necessary for large corporations, not individuals

• Budgeting is a one-time process and does not need to be revisited

Explain the relationship between sales, revenue, and cost in a business.

• Sales = Revenue x Price per unit, Profit = Revenue - Cost

• Revenue = Sales + Cost, Profit = Revenue - Cost

• Revenue = Sales x Price per unit, Profit = Revenue - Cost

• Revenue = Sales x Price per unit, Profit = Revenue + Cost

Why is sales forecasting important for financial planning?

• Sales forecasting only provides historical data, not future insights

• Financial planning does not require any forecasting

• Sales forecasting provides crucial insights into future revenue streams and helps in making informed financial decisions.

• Sales forecasting is not important for financial planning

How can a business determine its break-even point?

• Divide total fixed costs by the contribution margin per unit

• Add total fixed costs to the selling price per unit

• Multiply total variable costs by the selling price per unit

• Subtract total fixed costs from total variable costs

What are the potential risks of inaccurate sales forecasting?

• Increased customer satisfaction

• Financial losses, missed opportunities, damaged relationships with customers, inefficient resource allocation

• Decreased market share

• Decreased employee morale

How can a business assess its financial health?

• By analyzing employee satisfaction levels

• By conducting market research

• By reviewing financial statements, cash flow, profitability, and liquidity

• By focusing solely on sales performance