Fixed Cost or Variable Cost
Rent
Fixed
Break-even =
Fixed Costs ÷ (Selling Price – Variable Cost)
FC / (SP- VC)
Explain two consequences of poor record-keeping
Consequence 1: Poor decision-making
If a business does not keep accurate records of sales, costs, and profits, the owner may not know whether the business is making a profit or loss. This can lead to incorrect pricing or overspending.
Consequence 2: Cash flow problems
Without proper records, a business may forget to track payments owed by customers or bills that need to be paid. This could result in running out of cash and being unable to pay suppliers.
Profit is the difference between____ & ____
total revenue & total costs
What is a cash flow forecast ?
A cash flow forecast is a financial document that predicts the cash inflows and cash outflows of a business over a future period of time.
It shows how much cash is expected to come in and go out, and whether the business will have a surplus or deficit.
Importance of a Cash Flow Forecast
Prevents cash shortages
It helps the business identify periods when it may run out of cash and plan in advance (e.g., arrange a loan).
Supports decision-making
Owners can decide whether they can afford new equipment, staff, or expansion.
Improves financial control
It helps monitor spending and ensures bills, wages, and suppliers are paid on time.
Required by lenders/investors
Banks often require a cash flow forecast before approving a loan.
Cash Flow Forecast Formula
Net Cash Flow = Total Cash Inflows – Total Cash Outflows
Closing Balance = Opening Balance + Net Cash
Next Month’s Opening Balance = Previous Month’s Closing Balance
Example
If: Inflows = $5,000 Outflows = $3,000 Opening balance = $1,000
Then: Net Cash Flow = 5,000 – 3,000 = $2,000
Closing Balance = 1,000 + 2,000 = $3,000
Electricity used in production
Variable
SP=10, VC=4, FC=600
100
Evaluate whether lowering price always increases profit
Lowering price may increase sales because more customers can afford the product. If demand is price elastic, total revenue may rise and profit could increase.
However, lowering price also reduces the profit per unit. If costs remain the same and sales do not increase significantly, total profit may fall.
In addition, if competitors respond by lowering their prices, the business may enter a price war, reducing profit margins further.
Overall, lowering price does not always increase profit. It depends on demand, costs, competition, and whether increased sales volume is enough to cover the lower margin
Identify three sources of finance
Bank loan
Personal savings
Government grant
(Other acceptable: investors, crowdfunding, retained profit)
Opening 1,000;
M1 +2000/-1500;
M2 +1200/-1800;
M3 +3000/-2000
1,900
Packaging per product
Variable
SP=20, VC=8, FC=2,400
200
Define formal communication
Formal communication is information shared through official channels within a business, following a structured process (such as emails, reports, meetings, or letters).
Explain the difference between formal and informal support
Formal support comes from official organisations such as banks, government agencies, or professional advisors.
Informal support comes from family, friends, or personal contacts and is usually less structured.
Opening balance: $3,500
Month 1
Cash in: $4,000
Cash out: $3,200
Month 2
Cash in: $2,800
Cash out: $3,100
Month 3
Cash in: $3,500
Cash out: $2,400
Forecast Closing: $5,100
Contribution = Selling Price – __________
Variable Cost
SP=15, VC=5, FC=1,000
100
Give three examples of non-verbal communication
Facial expressions - Body language - Tone of voice
(Other acceptable answers: gestures, eye contact, posture)
This source of finance does not need to be repaid but is often difficult to obtain and may have conditions attached
government grant
Opening 500; M1 +1000/-1200; M2 +2000/-1000; M3 +1500/-1700
Closing: 300 → 1,300 → 1,100
2. If fixed costs are $2400 and contribution is $12, break-even = __________ units
200
SP=50, VC=30, FC=10,000
500
Explain why audience affects communication choice
The audience determines the level of formality, language, and method used.
For example, communication with customers may need to be polite and persuasive, while communication with employees may be instructional. A young audience may prefer social media, while investors may expect formal reports.
Evaluate Business Meetings
A business meeting allows direct interaction, immediate feedback, and discussion of ideas. It can improve teamwork and ensure everyone understands decisions clearly.
However, meetings can be time-consuming and costly. If poorly organised, they may waste time and reduce productivity.
Overall, business meetings are effective for complex discussions but may not be suitable for simple messages that could be sent by email.
Evaluate which support source is most reliable
Bank loans are reliable because they provide structured, predictable funding. However, they must be repaid with interest and may require collateral.
Government grants are attractive because they do not require repayment, but they are competitive and not guaranteed.
Informal support from family may be flexible and low pressure, but it may damage relationships if the business fails.
Overall, the most reliable support depends on the business situation. For established businesses with strong financial records, bank loans may be most reliable. For start-ups, a mix of personal savings and grants may be more suitable.
(Balanced arguments + justified conclusion)