1) Which of the following tasks is part of the role of the finance function? a) Choosing which pricing method to use b) Ordering raw materials from suppliers c) Paying the wages and salaries of the employees d) Providing cash flow information to management 2) Which of the following is the finance function of a business most likely to be concerned about? a) The communication methods used by the business b) The cost of running the business c) The ethical profile of the business d) The reputation of the business 3) Short term finance is most likely to be used by a business when it: a) has plenty of money in its bank account b) is looking for a new partner c) needs money to continue trading d) wants to build a new factory 4) One advantage to a company of using a bank loan to fund its expansion is that: a) business costs will fall b) cash flow monitoring will not be required c) interest is added to the amount that is owed d) the money can be paid back in instalments 5) Which of the following is a long term source of finance for an established company? a) A share issue b) An overdraft c) Sale of assets d) Trade credit 6) A business will make a loss if: a) its fixed costs are greater than its variable costs b) its revenue is greater than its total costs c) its total costs are greater than its revenue d) its variable costs are greater than its fixed costs 7) Which of the following is a consequence to a business of an increase in its monthly rent? a) Break-even quantity increases b) Profit increases c) Total revenue falls d) Variable costs rise 8) Which type of cost will not change even if output increases? a) Fixed cost b) Production cost c) Total cost d) Variable cost 9) A business sells 3000 items at 50p each. Its revenue is: a) £1,500 b) 50p c) £15,000 d) £3,000 10) Financial data for Sciser Ltd in 2016 is shown below. Revenue = £75,000, Cost of sales = £32,000 and Expenses = £28,000. Sciser Ltd’s gross profit in 2016 was: a) £4,000 b) £15,000 c) £43,000 d) £47,000 11) How is a firm’s gross profit margin calculated? a) Gross profit ÷ Revenue x 100 b) Net profit + Expenses c) Revenue - Cost of sales d) Revenue ÷ Gross profit x 100 12) A clothes shop has a net profit margin of 10%. This means: a) For every £1 of sales, the shop has costs of 10p b) For every £1 of sales, the shop makes 10p profit c) For every £10 of profit, the shop has costs of 10p d) For every £10 of profit, the shop makes £1 revenue 13) A guitar maker wishes to buy a computerised machine at a cost of £30 000. The forecasted net cash-flow for each of the next four years is £9 000. Based on the forecasted figures the average rate of return for this purchase will be: a) 5% b) 20% c) 30% d) 120% 14) Which of the following must be true for a business whose total revenue equals its total costs? a) The business has a cash flow crisis and needs an overdraft b) The business has made a net loss c) The business is making a profit d) The business is operating at its break-even level of output 15) Carlo charges £45 for his oven cleaning service. His variable cost for cleaning one oven is £10. Carlo’s fixed costs are £1050 per week. How many ovens does Carlo need to clean each week to break-even? a) 23 ovens b) 24 ovens c) 30 ovens d) 105 ovens 16) Calculating the break-even point for a business can help it work out its: a) average rate of return b) chances of making a profit c) liquidity position d) net profit margin 17) Cash is important in a partnership because: a) a business needs to pay its bills b) profits must be shared c) shareholders must be paid d) trade credit is not offered to partnerships 18) Which of the following is not a reason to produce a cash flow forecast? a) To estimate profit b) To plan future spending c) To predict when a business may run short of cash d) To set financial targets 19) A cash flow forecast for Coffee Enterprises is shown. Coffee Enterprises’ cash flow forecast is useful because: a) it alerts the owners to a likely cash shortage in May and June b) it provides a detailed breakdown of all business costs c) it shows the business will make a loss in May d) it will guarantee that the business gets an overdraft from the bank 20) An incomplete cash flow forecast for Swainston Sweets is shown below. What is Swainston Sweets’ opening balance for January? a) (£2000) b) (£200) c) £200 d) £2000

Check In Quiz 5: Finance

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