Question 1: Define the term 'cash flow' and explain why it is important for an enterprise.

Answer: Cash flow is the movement of money into and out of a business. It is important because it affects the company's ability to pay expenses, invest, and remain solvent.

Question 2: Identify three sources of finance that an enterprise can use to raise capital. For each, briefly describe a key advantage.

Answer: 1. Bank loans – provide large sums of money with structured repayment plans. 2. Investor funding – bring in capital without immediate repayment, often with additional expertise. 3. Crowdfunding – access a wide audience for small amounts of funds, increasing marketing exposure.

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 vary with production volume, such as raw materials and packaging costs.

Question 4: Calculate the total revenue if an enterprise sells 500 units at £15 each.

Answer: Total revenue = 500 units x £15 = £7,500.

Question 5: A business has total costs of £20,000 and total sales of £25,000. What is its profit? Show your working.

Answer: Profit = Total sales – Total costs = £25,000 – £20,000 = £5,000.

Question 6: Describe how a business can use a break-even analysis to make financial decisions.

Answer: A break-even analysis shows the level of sales needed to cover all costs. It helps businesses decide on pricing, sales targets, and whether to pursue new projects.

Question 7: Sketch a simple bar chart that could represent the monthly sales figures for a business over six months. Include axes labels and a key.

Answer: A bar chart with the horizontal axis labeled 'Months' (Month 1 to Month 6) and the vertical axis labeled 'Sales (£)'. Each bar represents sales for that month, with varying heights. The key indicates the sales values.

Question 8: List three financial documents that a business should prepare regularly and state their purpose.

Answer: 1. Income statement – shows profit or loss over a period. 2. Balance sheet – provides a snapshot of assets, liabilities, and equity. 3. Cash flow statement – tracks incoming and outgoing cash to assess liquidity.

Question 9: Draw a basic diagram illustrating the relationship between income, expenses, and profit in a business. Use arrows to show the flow of money.

Answer: A diagram with three boxes: Income (receiving money), Expenses (spending money), and Profit (Income minus Expenses). Arrows from Income and Expenses pointing towards Profit, indicating subtraction.

Question 10: Explain the concept of profit margin and how it is useful for evaluating a business’s financial health.

Answer: Profit margin is the percentage of revenue that remains as profit after all expenses are paid. It helps assess how efficiently a business is generating profit from sales.