Question 1: Define 'revenue' in the context of a business and explain why it is important.

Answer: Revenue is the total income generated from selling goods or services before any expenses are deducted. It is important because it indicates the business's ability to generate sales and sustain operations.

Question 2: Identify three common sources of income for a small enterprise.

Answer: Sales income from products or services, interest earned from savings or investments, and rental income from property or equipment.

Question 3: Explain what a 'profit' is and how it differs from 'revenue'.

Answer: Profit is the amount of money remaining after all expenses have been deducted from revenue. Unlike revenue, which is the total income, profit shows the actual financial gain of the business.

Question 4: Describe what a cash flow statement shows for a business.

Answer: A cash flow statement shows the inflows and outflows of cash within a specific period, helping to assess the business’s liquidity and ability to meet its financial obligations.

Question 5: List three types of costs that a business might incur.

Answer: Rent, wages or salaries, and raw materials or stock costs.

Question 6: Explain the difference between fixed costs and variable costs with examples.

Answer: Fixed costs remain constant regardless of the level of production or sales, such as rent or insurance. Variable costs change in proportion to production, such as raw materials or packaging costs.

Question 7: Draw a simple bar chart that compares monthly sales for a business over four months. Label the axes clearly.

Answer: A bar chart with the x-axis labeled as 'Months' (Month 1, Month 2, Month 3, Month 4) and the y-axis labeled as 'Sales (£)'. Four bars of varying heights representing sales figures for each month. The height of each bar corresponds to the sales amount for that month.

Question 8: Sketch a basic profit and loss statement outline for a small business. Include the main sections and a brief description of each.

Answer: A rectangle divided into sections: Revenue (total sales), Cost of Goods Sold (raw materials, production costs), Gross Profit (Revenue minus COGS), Operating Expenses (rent, wages, utilities), Net Profit (Gross profit minus expenses).

Question 9: Explain why it is important for a business to keep accurate financial records.

Answer: Accurate financial records help a business monitor its financial health, comply with legal requirements, make informed decisions, and prepare for taxes or funding applications.

Question 10: Identify two financial ratios that are useful for assessing a business's profitability and briefly describe what they measure.

Answer: Gross profit margin (measures the percentage of revenue that exceeds the cost of goods sold) and net profit margin (indicates the percentage of revenue remaining after all expenses).