Question 1: Define the term 'profit' in the context of a small business.

Answer: Profit is the amount of money left after subtracting all the costs and expenses from the total revenue earned by the business.

Question 2: List three types of income that a business might earn.

Answer: Sales revenue, interest income, and rental income.

Question 3: Explain the difference between fixed costs and variable costs with two examples of each.

Answer: Fixed costs are expenses that do not change with the level of production, such as rent and salaries. Variable costs change depending on how much a business produces, such as raw materials and packaging costs.

Question 4: A business receives £10,000 in sales revenue and has total costs of £7,000. What is its profit?

Answer: Profit = Revenue - Costs = £10,000 - £7,000 = £3,000.

Question 5: Describe what a cash flow forecast is and why it is important for a new business.

Answer: A cash flow forecast estimates the money coming in and going out of a business over a period. It helps the business plan for shortages of cash and ensures they can meet their expenses.

Question 6: Sketch a simple income statement layout for a small business showing sections for revenue, costs, and profit.

Answer: A clear income statement would have the title at the top, then sections labeled 'Revenue', 'Costs', and 'Profit'. Revenue and Costs are listed with their amounts, and Profit is calculated as Revenue minus Costs.

Question 7: Identify two ways a business can increase its profit.

Answer: By increasing sales revenue or reducing costs.

Question 8: Explain why keeping accurate financial records is important for an enterprise.

Answer: Accurate records help the business track its financial health, prepare for taxes, make informed decisions, and comply with legal requirements.

Question 9: Draw a simple pie chart layout representing the proportion of fixed and variable costs in a business.

Answer: The sketch should show a circle divided into two sections, one labeled 'Fixed Costs' and the other 'Variable Costs', with approximate proportions (e.g., 60% fixed, 40% variable).

Question 10: What is a loan, and how can it help a new business with finance?

Answer: A loan is money borrowed from a lender that must be repaid with interest. It can help a new business by providing funds to start or expand operations.

Question 11: Sketch a simple bar chart comparing monthly income and expenses over six months for a small business.

Answer: The sketch should include six pairs of bars, each pair representing a month, with one bar for income and another for expenses, clearly labelled.