Question 1: Define 'revenue' in the context of a business. Why is it important for a business to track its revenue?

Answer: Revenue is the total amount of money a business earns from its sales of goods or services. It is important to track revenue to assess the business's income and measure its financial performance.

Question 2: 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 or sales, such as rent and salaries. Variable costs change depending on the level of production, like raw materials and packaging costs.

Question 3: Why is it important for a new business to prepare a budget? List two benefits of budgeting.

Answer: Preparing a budget helps a new business plan its spending and manage cash flow. It also helps in setting financial goals and monitoring performance against those goals.

Question 4: Describe what is meant by 'profit' in a business. How is profit calculated?

Answer: Profit is the money a business makes after subtracting all expenses from revenue. It is calculated by subtracting total costs (expenses) from total revenue.

Question 5: Identify three sources of finance that a small start-up business might use to raise money.

Answer: Sources of finance include personal savings, bank loans, and investments from family or friends.

Question 6: Describe what a 'cash flow forecast' is and why it is useful for a business.

Answer: A cash flow forecast predicts the money coming into and going out of a business over a specific period. It helps businesses plan for periods of cash shortage and ensure they have enough money to operate.

Question 7: Sketch a simple bar chart that shows the monthly revenue of a business over six months. Label the axes and provide example data points for each month.

Answer: A bar chart with the horizontal axis labeled 'Months' (January to June) and the vertical axis labeled 'Revenue (£)'. The bars should vary in height to represent different revenue amounts, e.g., January: £200, February: £300, March: £250, April: £400, May: £350, June: £300.

Question 8: List two reasons why keeping accurate financial records is important for an enterprise.

Answer: Accurate records help in making informed financial decisions and ensure compliance with legal and tax obligations.

Question 9: Draw a simple diagram to illustrate the basic flow of income and expenses in a business. Use arrows to show the direction of money coming in and going out.

Answer: A diagram with two main components: 'Income' arrow pointing towards the business, and 'Expenses' arrow pointing away from the business. Include labels such as sales, wages, rent, and supplies to clarify the flow.

Question 10: Explain what a 'profit margin' is and how it can be useful for a business to know this figure.

Answer: Profit margin is the percentage of revenue that remains as profit after expenses are deducted. It helps businesses evaluate their profitability and compare performance over time or against competitors.