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Explain TWO factors to consider the appropriate type of finance used.
size of business, cost, purpose of funds, duration, external environment etc.
Identify THREE internal sources of finance
Personal funds, Retained profit, sale of assets
Identify FOUR external sources of finance
Crowdfunding, business angels, share capital, bank loan, trade credit etc.
Explain TWO disadvantages of using ARR as an investment appraisal method.
Ignores timing of cash flows, forecast figures may not be accurate
Explain TWO disadvantages of using payback period as an investment appraisal method.
Short term approach, does not account for overall return / profit
A firm takes out a bank loan. Explain whether this is a cash inflow or outflow.
Initially inflow, before interest payments (outflow) and principal paid back (outflow)
Identify THREE cash inflows and THREE cash outflows.
Any reasonable answer!
Explain the relationship between investment, profit & cash flow.
Short vs. long run effects of investment on cash flows and profit.
Explain TWO ways in which a firm could improve its acid test (quick) ratio.
Extend trade credit, insist on paying in cash, change pricing strategies, improve stock management system
Identify THREE profitability ratios.
Gross profit margin, profit margin, return on capital employed
The formula for the payback period is... (assuming same cash flow for each period)
Cost of investment / Contribution per month
Identify THREE examples of intangible assets.
Patents, trademarks, brands, goodwill etc.
Outline TWO differences between the income statement of a non-profit entity vs. a for-profit entity.
No dividends + surplus instead of profit
How is profit before tax calculated? (start with gross profit)
Gross profit - expenses - interest.
True or false: Packaging costs can be classified as a fixed cost of production.
False - these vary with the level of output
True or false: Above the line marketing by placing advertisements in local and national newspapers would be an example of variable costs.
False
Identify THREE revenue streams that MrBeast (the Youtuber) has.
YouTube itself, sponsorships with companies, MrBeast products
Gardeners’ Pots has total costs of $2,000 and fixed costs of $1,100 for an output level of 600 units. Calculate the variable cost per unit for the firm. [2 marks]
TVC = TC – TFC = $2,000 – $1,100 = $900, AVC = $900 / 600 = $1.50
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