Question 1: Define 'cash flow' and explain why it is important for a new 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 meet its financial obligations, pay suppliers, and invest in growth.

Question 2: Identify and describe three different sources of finance that a start-up business might use.

Answer: 1. Personal savings: Funds invested by the owner from their personal money. 2. Bank loans: Borrowed money that must be repaid with interest. 3. Angel investors: Individuals who provide capital in exchange for ownership equity or debt repayment.

Question 3: Calculate the total revenue if a business sells 250 units at £15 each.

Answer: Total revenue = 250 units × £15 = £3,750.

Question 4: List three fixed costs that a business might incur.

Answer: Rent, insurance, salaries of permanent staff.

Question 5: Describe what is meant by 'profit' in a business context.

Answer: Profit is the amount of money remaining after all expenses and costs have been deducted from total revenue. It indicates the financial gain of the business.

Question 6: Sketch a simple profit and loss chart showing profit, loss, and break-even point. Label the axes and key points clearly.

Answer: A graph with the x-axis labeled 'Sales' and the y-axis labeled 'Profit/Loss'. A line starting below zero (loss), rising through the break-even point (where profit is zero), and above zero (profit). The break-even point is marked where total costs equal total revenue.

Question 7: Explain the difference between 'fixed costs' and 'variable costs' with examples.

Answer: Fixed costs are expenses that do not change with the level of production, such as rent or salaries. Variable costs vary directly with production volume, such as raw materials or packaging costs.

Question 8: A business has total costs of £8,000 and total revenue of £12,000. What is its profit? Show your working.

Answer: Profit = Total revenue - Total costs = £12,000 - £8,000 = £4,000.

Question 9: Draw a simple bar chart comparing the monthly sales of a business over four months: £2,000, £3,500, £3,000, and £4,500. Label the months and sales amounts.

Answer: A bar chart with four bars, each representing a month. The height of each bar corresponds to the sales amount: month 1 (£2,000), month 2 (£3,500), month 3 (£3,000), month 4 (£4,500). Labels for months on the x-axis and sales amounts on the y-axis.

Question 10: Identify two financial documents a business would produce regularly and explain their purpose.

Answer: 1. Income statement (profit and loss account): Shows the business’s revenues, expenses, and profit over a period. 2. Balance sheet: Provides a snapshot of the business’s assets, liabilities, and owner’s equity at a specific point in time.