Business A level Theme 3 Formula

What is the formula for a 3-month moving average?

• Add the 3 months together and divide by 3

• Add the 4 months together and divide by 3

• Add the 3 months together and divide by 4

• Add the last month’s sales and divide by 2

The sales figures for the last 3 months are £10,000, £12,000, and £14,000. What is the 3-month moving average?

• £12,000

• £13,000

• £14,000

• £11,000

How is payback calculated?

• Initial Investment ÷ Annual Cash Inflows

• Annual Cash Inflows ÷ Initial Investment

• (Annual Cash Inflows × Initial Investment) ÷ 12

• Initial Investment ÷ Total Profit

A business has an initial investment of £20,000 and annual cash inflows of £5,000. What is the payback period?

• 5 years

• 4 years

• 3 years

• 2 years

How do you calculate payback if it falls between two years?

• (Amount Remaining to Cover ÷ Amount Recovered in the Next Year) × 12

• (Initial Investment ÷ Total Annual Inflows) × 12

• (Remaining Cash ÷ Initial Investment) × 12

• (Annual Cash Flow ÷ Total Investment) × 100

A business has invested £25,000. After 2 years, £20,000 has been recovered, and the remaining £5,000 will be recovered in the third year. What is the payback period?

• 2 years and 3 months

• 2 years and 5 months

• 2 years and 1 month

• 3 years

Total profit from investment is calculated by:

• Total Income from Investment - Initial Cost of Investment

• Initial Investment ÷ Annual Income

• Total Costs ÷ Total Income

• Annual Cash Inflows - Initial Investment

A company invests £15,000 and receives £3,000 in annual income for 5 years. What is the total profit from the investment?

• £3,000

• £15,000

• £18,000

• £12,000

How do you calculate average annual profit for the Average Rate of Return (ARR)?

• Total Income from Investment ÷ Expected Lifespan of the Asset

• Total Investment ÷ Total Annual Income

• Initial Investment ÷ Total Profit

• Total Income ÷ Number of Years

A business has a total profit of £50,000 from an investment over 5 years. What is the average annual profit?

• £10,000

• £12,000

• £50,000

• £5,000