Business Finance Revision

Name:

Date:

💰 Part 1: Financial Statements & Analysis

1. Which financial statement shows a business's financial position at a specific point in time?

Income Statement

Balance Sheet

Cash Flow Statement

Statement of Equity

2. Calculate the current ratio for XYZ Ltd: Current Assets = £45,000, Current Liabilities = £30,000

3. Which of the following are examples of non-current assets? (Select all that apply)

Machinery

Inventory

Buildings

Cash

4. A business has a gross profit margin of 40% and revenue of £200,000. Calculate the gross profit.

5. What does a debt-to-equity ratio of 2:1 indicate about a business?

6. Complete the accounting equation: Assets = _____________ + _____________

7. Which investment appraisal method considers the time value of money?

Payback Period

Average Rate of Return (ARR)

Net Present Value (NPV)

Break-even Analysis

8. Calculate the payback period for an investment of £60,000 with annual cash flows of £15,000.

9. Explain one advantage and one disadvantage of using retained profit as a source of finance.

Advantage:

Disadvantage:

10. Which sources of finance would be most appropriate for a small business wanting to purchase new equipment? Justify your answer.

11. An investment has an initial cost of £50,000 and generates total returns of £70,000 over 4 years. Calculate the Average Rate of Return (ARR).

12. Evaluate the use of Net Present Value (NPV) as an investment appraisal technique for a large manufacturing company.