Question 1: Define 'cash flow' and explain why it is important for a business.

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

Question 2: List three common sources of finance that a new business might use to start up.

Answer: Bank loans, personal savings, and investments from family or friends.

Question 3: Describe what a budget is and explain its role in financial planning for an enterprise.

Answer: A budget is a financial plan that estimates income and expenses over a period. It helps businesses control spending and plan for future growth.

Question 4: Identify two advantages and two disadvantages of using a bank overdraft as a source of finance.

Answer: Advantages: Quick access to funds, flexible repayment. Disadvantages: High interest rates, risk of falling into debt if not managed properly.

Question 5: A business plans to expand its operations. Which financial documents should it prepare to support this decision?

Answer: Profit and loss statement, cash flow forecast, and balance sheet.

Question 6: Explain the difference between revenue and profit.

Answer: Revenue is the total income generated from sales before expenses. Profit is the remaining income after deducting all expenses from revenue.

Question 7: Sketch a simple diagram representing the flow of money in a business, including income, expenses, and profit.

Answer: A diagram should show income flowing into the business, expenses flowing out, and the remaining amount labeled as profit.

Question 8: What is a loan amortization schedule, and why is it useful for a business?

Answer: A loan amortization schedule shows how each payment is split between interest and principal over time. It helps businesses plan repayment schedules and understand total interest paid.

Question 9: Design a basic cash flow forecast template. Label the sections that should be included.

Answer: A cash flow forecast should include sections for projected income, projected expenses, net cash flow, beginning cash balance, and ending cash balance.

Question 10: Discuss the importance of maintaining accurate financial records for an enterprise.

Answer: Accurate financial records help in tracking business performance, making informed decisions, complying with legal requirements, and attracting investors.