UNIDAD EDUCATIVA BILINGUE LA MODERNA

AÑO LECTIVO 2022-2023

STUDENT´S NAME: ________________ DATE:_______________

TEACHER: MISS ENIFF BAYAS CLASS: ______

STUDY GUIDE FOR ENTREPRENEUSHIP 2ND TERM EXAM

1. What is the purpose of finance for business
Business finance is the cornerstone of every organization. It refers to the corpus
of funds and credit employed in a business. Business finance is required for
purchasing assets, goods, raw materials and for performing all other economic
activities. Precisely, it is required for running all the business operations.
2. What is the difference between Revenues and expenditures?
Revenue items chronicle a company's efforts to make money during a given
period, make more of it over time and keep operating coffers flush with capital.
Examples include sales, investment gains and discount rebates. Expenses
represent everything a company spends money on, generally to operate and
settle commitments.
3. Draw a graphic organizer explaining the internal and external sources of
finance, explain each one

4. Reflect about the advantages and disadvantages of each source of finance

5. What is the difference between Capital expenditure and revenue
expenditures?
Capital expenditure is the money spent by a firm to acquire assets or to
improve the quality of existing ones. Revenue expenditure is the money spent
by business entities to maintain their everyday operations.
6. Draw a table and categorize short, medium and long sources of finance
Short-term refers to funds that generally have to be paid back within a year.
Medium-term financing usually requires funds to be paid back between one
 and five years; whilst long-term finance is generally anything that is paid back
after five or more years.
7. In your opinion what could be a good source of finance for business
expansion, justify your answer explaining what were the factors that
influence your decision (see influential factors for source of finance)
Financing expansion can take many forms. You can use your own money,
borrow from friends and family, use internally generated funds, approach
equity investors or tap banks and other lenders. The sources for funding growth
are generally the same sources you may have used to start your business.
8. What are semi variable costs, explain and give one example
Electricity is a good example of a semi-variable cost. The base rate for service
may be constant, but as production grows, power consumption and the
company's electricity bills go up. In other words, there is both a fixed and
variable aspect to semi-variable costs.
9. Explain the difference between direct and indirect costs, give 1 example of
each
Direct costs are associated with the production cycle, while indirect costs keep
the production cycle operating. Employee salaries and the cost of raw materials
are direct costs, for example, and utilities fall under indirect costs.
10. How can Total Revenues be calculated?
The formula to know your business' revenue is to multiply the total amount of
products (TP) or services sold by the price of those products or services.
11. What are total costs?
Total cost refers to the overall cost of production, which includes both fixed and
variable components of the cost. In economics, the total cost is described as the
cost that is required to produce a product.
12. What is the difference between Revenues and costs?
The difference between the revenue and cost (found by subtracting the cost
from the revenue) is called the profit. The difference between revenue and cost
when revenue exceeds the cost incurred in operating the business.
13. What is the use of the break even analysis?
Break-even analysis tells you how many units of a product must be sold to cover
the fixed and variable costs of production. The break-even point is considered a
measure of the margin of safety. Break-even analysis is used broadly, from stock
and options trading to corporate budgeting for various projects.
14. Differentiate Total Contribution from Contribution per unit
Total Contribution is the difference between Total Sales and Total Variable
Costs. Formulae: Contribution = total sales less total variable costs. Contribution
per unit = selling price per unit less variable costs per unit.
15. Practice drawing up a break even chart finding break even point and margin
of safety (remember to show all the working, practice with class exercises )

16. What does a low margin of safety indicates?

On the other hand, a low safety margin indicates a not-so-good position. It must
 be improved by increasing the selling price, increasing sales volume, improving
contribution margin by reducing variable cost, or adopting a more profitable
product mix.
17. What does a high margin of safety indicate?
A higher margin of safety means the company has more protection from a
decline in sales. It acts as a buffer so that volatile sales periods are not
detrimental to the business. A low margin of safety indicates the company does
not have a wide buffer and needs to make some changes.
18. Study the interpretation of break even charts (changes in price and cost)
A breakeven chart is a chart that shows the sales volume level at which total
costs equal sales. Losses will be incurred below this point, and profits will be
earned above this point. The chart plots revenue, fixed costs, and variable costs
on the vertical axis, and volume on the horizontal axis
19. What is the difference between target profit, target profit output and target
price. Explain with an example.

20. Explain with examples why final accounts are important for stakeholders
Final accounts let shareholders assess their investments so they may make
informed decisions. The organization's liquidity position and the amount of
earnings and dividends that shareholders will get are of greater interest to
them.
21. How important is ethics in the accounting practice, mention 2 principles
applied to companies for accounting practices.
Ethics require accounting professionals to comply with the laws and regulations
that govern their jurisdictions and their bodies of work. Avoiding actions that
could negatively affect the reputation of the profession is a reasonable
commitment that business partners and others should expect.
22. What is the purpose of the Income statement, what kind of information
provides?
The income statement shows a company's expense, income, gains, and losses,
which can be put into a mathematical equation to arrive at the net profit or loss
for that time period. This information helps you make timely decisions to make
sure that your business is on a good financial footing.
23. Distinguis between gross profit and COGS
Gross profit is the profit a business makes after subtracting all the costs that are
related to manufacturing and selling its products or services. You can calculate
gross profit by deducting the cost of goods sold (COGS) from your total sales.
24. Practice with student workpoint #3.11 page 196
25. What are the 3 sections of the Profit and loss account. Explain what
information is provided in each
There are three main sections of a P&L statement: revenues, COGS, and
Operational Expenses. Any listed line item on a P&L goes under either revenue
or an expense account, and all these items determine the bottom line.
26. What is the purpose of the balance sheet, what kind of information is
provided?
A balance sheet gives you a snapshot of your company's financial position at a
given point in time. Along with an income statement and a cash flow statement,
a balance sheet can help business owners evaluate their company's financial
standing.
27. Practice at home preparing a balance sheet with student workpoint 3.12 page
199