Question 1: Define the term 'revenue' in a business context.

Answer: Revenue is the total amount of money generated from the sale of goods or services before any expenses are deducted.

Question 2: Explain the difference between 'profit' and 'cash flow'.

Answer: Profit is the money remaining after all expenses are deducted from revenue, while cash flow refers to the actual movement of money into and out of the business over a period of time.

Question 3: A business has total sales of £500,000 and total costs of £350,000. Calculate its gross profit.

Answer: Gross profit = Total sales - Cost of goods sold (assuming costs are COGS). If costs are all expenses, then gross profit = £500,000 - £350,000 = £150,000.

Question 4: Describe what is meant by 'working capital' and why it is important for a business.

Answer: Working capital is the difference between a company's current assets and current liabilities. It is important because it indicates the short-term financial health and ability to meet day-to-day expenses.

Question 5: Sketch a simple profit and loss (income) statement layout, including at least three key components.

Answer: A correct sketch would include a title, sections for Revenue, Expenses, and Net Profit, with lines indicating the calculation of profit as Revenue minus Expenses.

Question 6: Explain the purpose of a 'budget' in financial planning.

Answer: A budget is a financial plan that estimates income and expenditure over a period, helping businesses control spending and plan for future growth.

Question 7: Identify and define two types of costs that a business might incur.

Answer: Fixed costs are expenses that do not change with the level of production, such as rent; variable costs vary with production volume, such as raw materials.

Question 8: Draw a basic cash flow forecast table with columns for Month, Inflows, Outflows, and Net Cash Flow.

Answer: A correct sketch would include a table with at least three rows for different months, showing estimated inflows and outflows, and a final column calculating net cash flow (Inflow minus Outflow).

Question 9: What is the significance of 'break-even point' for a business? Describe it briefly.

Answer: The break-even point is where total revenues equal total costs, meaning the business is neither making a profit nor a loss. It helps determine the minimum sales needed to cover all expenses.