BTEC Business Unit 3: Business Finance Exam Questions And Answers 2024

BTEC Business Unit 3: Business Finance Exam Questions And Answers 2024 Capital Income - correct answer-Capital income is income generated by an asset over time, rather than from work done using the asset, according to Investopedia. If a farmer buys land for a certain amount of money and sells it at a profit after one year, the difference in the prices is capital income. Revenue - correct answer-Revenue is the money generated from normal business operations, calculated as the average sales price times the number of units sold. It is the top line (or gross income) figure from which costs are subtracted to determine net income. Capital Income includes...(DOMSL) - correct answer-Loan Mortgage Shares Owner Capital Debentures Revenue income includes...(DICRS) - correct answer-Sales (cash, credit) Rent received Commission Interest received Discount received Non-current assets - correct answer-Long-term resources that will be used by the business repeatedly over a period of time Current assets - correct answer-Assets that companies expect to convert to cash or use up within one year or the operating cycle, whichever is longer. Intangible assets - correct answer-long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value BACs - correct answer-The central payment system used to process different types of electronic payment. CHAPS - correct answer-Clearing House Automated Payment System, a same-day payment system for high-value transactions, such as a house purchase. Break-even point - correct answer-the point at which the costs of producing a product equal the revenue made from selling the product Break Even Formula (units) - correct answer-Fixed costs ÷ (sales price per unit - variable cost per unit) Benefits of break-even - correct answer-Focuses on how long it will take the start up to become profitable Helps evaluate risk Illustrates the importance of keeping fixed costs low Calculations are simple Limitations of break-even - correct answer-Unrealistic assumptions - products are not all sold for the same price Sales are unlikely to be the same as output Variable costs do not stay the same Most businesses sell more than one product A planning aid rather than a decision-making tool Ways to reduce break-even - correct answer-Maximize added value per unit sold: Aim to maximise the selling price per unit Negotiate to reduce the cost of raw materials and other inputs (low variable costs) Keep fixed costs under control Gross Profit Formula - correct answer-Revenue - cost of sales Net profit formula - correct answer-total revenue - total expenses Gross profit margin formula - correct answer-Gross profit/sales revenue x 100 Net profit margin formula - correct answer-Net profit/sales revenue x 100 Mark Up - correct answer-· Mark up is the gross profit as a percentage of cost sales · It shows what percentage of the cost of sales is added to reach the selling price Return on capital employed (ROCE) - correct answer-Net profit before interest and tax / Capital Employed x 100 Statement of Financial Position - correct answer-· Shows the value of the business · Often at the end of a financial year, but also if the business needs to show its value · Includes what a business owns (assets) and what it owes (liabilities) Current liability - correct answer-Owed by the business that needs to be paid back within a year Overdrafts, Trade payables, Accruals - expenses paid after the priof it relates to e.g. utility bills Net current assets - correct answer-· Reflects ability to meet short term debt