Cash Flow & Profitability
What does "cash flow" refer to in a business?
The movement of money in and out of a business
What is personal finance?
The management of money by individuals and families
What is a fixed cost?
A cost that does not change with production, such as rent.
What does "investing" mean?
Putting money into assets expecting future profit.
If a business sells cupcakes for $5 each and sells 100 cupcakes, how much revenue does it generate?
$500
What are the two main components of cash flow?
Income and Costs
What percentage of your income should be saved according to the 50-30-20 rule?
20%
Give an example of a variable cost.
Raw materials, utilities, or commissions.
Why is financial planning important for businesses?
It helps them allocate resources and ensure profitability.
A company wants to expand but has limited funds. What is one way to finance its growth?
Loans, investors, reinvesting profits, etc.
Name one way a company can improve its cash flow.
Reducing expenses, increasing sales, adjusting prices, etc.
Why is saving money important?
For future security and financial stability
What is a business budget used for?
To plan and manage expenses and revenues.
What is the difference between income and net profit?
Income is the revenue from sales, net is the revenue minus the costs
What should you do if your expenses exceed your income?
Reduce spending, increase income, or adjust the budget.
If a bakery earns $200 and has expenses of $120, what is the profit margin?
40%
What are the three categories in the 50-30-20 rule?
50% needs, 30% wants, 20% savings/investments
What happens if a business does not track its expenses properly?
It may run out of money or face financial problems.
How do interest rates impact personal and business loans?
Higher rates make borrowing more expensive, lower rates make it cheaper
Why do some businesses fail even if they have high sales?
High costs, poor financial management, bad investment decisions, etc.
What happens if a business has more expenses than income for a long period?
May go to bankrupt
What is the difference between personal finance and corporate finance?
Personal finance focuses on individuals; corporate finance is for businesses.
Why materials are consider variable costs?
Because material will change depending on the sales.
What is an emergency fund, and why is it important?
A savings fund used for unexpected expenses to prevent financial hardship.
What is an example of an asset a business might own?
Property, equipment, inventory, cash, etc.