Business Studies
Financial information and decisions — Topic 5
- 1.
A product sells for $20. Variable cost per unit is $12. Fixed costs are $4,000 per month. Calculate the monthly break-even output in units.
[4 marks] - 2.
Using the same product (break-even output 500 units), the business actually sells 650 units in a month. Calculate its margin of safety.
[3 marks] - 3.
A business has revenue of $80,000 and cost of sales of $50,000 for the year. Calculate its gross profit margin.
[4 marks] - 4.
Explain why a profitable business could still run out of cash and be unable to pay its suppliers.
[2 marks] · no calculator - 5.
Which is an example of a short-term source of finance for a business? A A 10-year bank loan B Issuing new shares C A bank overdraft D Selling a fixed asset such as land
[1 mark] · no calculator - 6.
Explain one advantage to a business of using retained profit, rather than a bank loan, to finance a new investment.
[2 marks] · no calculator - 7.
In March, a small business forecasts cash inflows of $6,000 and cash outflows of $7,500. Its opening cash balance on 1 March is $2,000. Calculate its closing cash balance at the end of March.
[4 marks] - 8.
A retailer's cash flow forecast shows a negative closing balance for two consecutive months. Analyse two actions the business could take to improve its cash flow position.
[3 marks] · no calculator - 9.
A profitable private limited company needs $200,000 to open a new branch. It can take out a long-term bank loan, or issue more shares to existing shareholders. Recommend one option using two relevant factors.
[3 marks] · no calculator