Question 1: Define the term 'initial capital' in the context of a new business.

Answer: Initial capital refers to the amount of money invested at the start of the business to cover start-up costs and initial expenses.

Question 2: List three sources from which a new business can raise finance.

Answer: Bank loans, personal savings, investments from family or friends, government grants, or angel investors.

Question 3: Explain the difference between revenue and profit in a business context.

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

Question 4: Identify two fixed costs a small cafe might have.

Answer: Rent for the premises and salaries of permanent staff.

Question 5: Describe what is meant by 'cash flow' in a business.

Answer: Cash flow refers to the movement of money into and out of a business over a period of time, representing the company's liquidity.

Question 6: Sketch a simple financial chart showing the relationship between revenue, costs, and profit in a business.

Answer: A bar chart with three bars: Revenue (highest), Costs (less than revenue), and Profit (difference between revenue and costs). The sketch should clearly show the size difference indicating profit margin.

Question 7: What is a 'break-even point' and why is it important for a new business?

Answer: The break-even point is the level of sales at which total revenue equals total costs, meaning the business is neither making a profit nor a loss. It's important as it indicates when the business becomes financially sustainable.

Question 8: Draw a simple table that compares 'Fixed Costs' and 'Variable Costs' with two examples for each.

Answer: A table with two columns labeled 'Fixed Costs' and 'Variable Costs'. Under Fixed Costs, include 'rent' and 'salaries'. Under Variable Costs, include 'raw materials' and 'commission payments'.

Question 9: Explain the term 'budget' and how it helps a small business manage its finances.

Answer: A budget is a financial plan that estimates income and expenses over a period. It helps businesses control spending, plan for future growth, and ensure they do not overspend.

Question 10: Identify one benefit and one challenge of securing external finance for a new business.

Answer: Benefit: Access to large sums of money to grow the business. Challenge: Repayment obligations and potential interest costs that can strain cash flow.