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Business Financial Planning Fundamentals

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Business Financial Planning Fundamentals

Use Australian dollars (A$). Choose the best answer where options are given. Show your working for calculations.

Financial Planning Knowledge

1.What is the main reason a small business prepares a budget?

To record only the money it spent last year
To plan expected income and spending and monitor them over time
To guarantee that it will make a profit
To choose the business's name

2.Select every item that is a business expense.

Monthly internet bill
Money received from customers
Wages paid to staff
Payment for ingredients used to make products
A cash contribution from the owner

3.A business estimates its sales and costs for the next quarter using past results and current plans. What is this process called?

Forecasting
Invoicing
Auditing
Recruiting

4.Match each funding source with the correct description.

A. Bank loan
B. Personal savings
C. Crowdfunding
D. Government grant

Money the owner has set aside
Funding awarded for an eligible purpose, usually under set conditions
Small contributions collected from many supporters, often online
Money borrowed and usually repaid with interest

Build and Read a Monthly Budget

5.Kai sells handmade candles. His expected monthly income is A$1,950 from online orders and A$650 from weekend markets. His monthly expenses are A$780 for materials, A$520 for a stall and workspace, A$110 for insurance and A$190 for advertising. Calculate his total monthly income.

6.Using Kai's monthly budget figures, calculate his total monthly expenses.

7.Using Kai's monthly budget figures, calculate his monthly profit or loss. Subtract total expenses from total income.

8.Based on these estimates, does Kai's business make a monthly profit or a monthly loss?

A monthly profit
A monthly loss
Neither; income and expenses are equal

Forecasting and Funding Decisions

9.Give two ways a sales and cash-flow forecast could help a small business make decisions. Include a practical example in each explanation.

10.An Australian teenager plans to offer online tutoring. Give one advantage and one disadvantage of using personal savings to fund the start-up.

11.For the same tutoring business, give one advantage and one disadvantage of taking out a bank loan.

12.Kai expects A$2,600 income and A$1,600 expenses in an ordinary month. Make a three-month forecast for a period that includes a local summer market. State how income and expenses might change in each month, and explain one assumption behind your forecast.