Calculations:

• The break-even point is the quantity needed to cover fixed costs only.

  False
• Match the financial term with its purpose:

  Profit Margin ↔️ Measures the percentage of revenue left after deducting costs

  Break-Even Point ↔️ Determines the quantity needed to cover costs

  ROI ↔️ Evaluates the efficiency of an investment
• Liquidity ratios indicate whether a company has enough current assets to cover its current liabilities.


  True
• Fixed costs change with the level of production.

  False
• Understanding solvency is crucial for assessing a business's ability to meet short-term financial obligations.

  False
• Profitability measures how efficiently a business generates profit from its revenue
• What are the two main components of total costs?

  Fixed costs and variable costs
• Variable costs vary directly with the level of production.


  True
• What is the formula for calculating total revenues?

  Selling Price per Unit x Quantity Sold
• Steps to calculate the break-even point

  1️⃣ Determine fixed costs

  2️⃣ Determine selling price per unit

  3️⃣ Determine variable cost per unit

  4️⃣ Apply the break-even point formula
• Return on investment is calculated using the formula: ROI = (Net Profit / Cost of Investment) x 100%
• Profit is the amount of money a business makes after deducting all costs from its revenue.

  True
• Net Profit is calculated by subtracting Operating Expenses from Gross Profit
• A business with a Gross Profit of £30,000 and a Net Profit of £20,000 has deducted all its expenses
• If a business has fixed costs of £20,000, a selling price of £10 per unit, and a variable cost of £6 per unit, the break-even point is 5,000 units.


  True
• The Return on Investment (ROI) formula is (Net Profit / Cost of Investment) multiplied by 100%
• What are financial calculations used for in business planning?

  Analyze financial performance
• What does ROI measure in financial calculations?

  Efficiency of investment
• Order the key financial terms from most short-term to most long-term focus:

  1️⃣ Liquidity

  2️⃣ Profitability

  3️⃣ Solvency
• Solvency ratios like the debt-to-equity ratio show whether a company has too much debt
• Variable costs vary directly with the level of production
• Total costs are comprised of fixed costs and variable costs.
• What does liquidity refer to in financial terms?

  Ability to meet short-term obligations
• What is the formula for calculating total costs?

  Fixed Costs + Variable Costs
• Gross profit is calculated by subtracting the cost of goods sold from total revenue
• The break-even point formula is Fixed Costs / (Selling Price per Unit - Variable Cost per Unit).


  True
• The formula for Gross Profit is Revenue minus the Cost of Goods Sold
• Match the profit type with its formula:

  Gross Profit ↔️ Revenue - Cost of Goods Sold

  Net Profit ↔️ Gross Profit - Operating Expenses
• If a company has a revenue of £50,000 and COGS of £20,000, the Gross Profit is £30,000.


  True
• Steps to calculate the break-even point:

  1️⃣ Identify fixed costs

  2️⃣ Determine selling price per unit

  3️⃣ Calculate variable cost per unit

  4️⃣ Apply the break-even point formula
• A higher margin of safety indicates a lower risk of the business making a loss.


  True
• If a business invests £10,000 and generates a net profit of £2,000, the ROI is 20%.


  True
• The break-even point formula is Fixed Costs divided by (Selling Price per Unit minus Variable Cost per Unit
• If a business invests £20,000 and generates a net profit of £5,000, the ROI is 25%.


  True
• Profit margin is calculated by dividing net profit by revenue
• Financial calculations help assess profitability, liquidity, and solvency
• What does profitability measure in financial terms?

  How profitable a business is
• What are the two main components of total costs?

  Fixed and variable costs
• Match the cost type with its definition:

  Fixed Costs ↔️ Costs that do not change with production levels

  Variable Costs ↔️ Costs that vary directly with production levels
• What are the three key financial terms crucial for effective business planning?

  Profitability, liquidity, solvency