Business BTEC Level 3 Finance Questions with
Correct Answers
Net Current Assets (Internal) The amount of money that a business has on hand in a
given year, or what they will have. Also known as working capital, it is calculated by subtracting
current liabilities from current assets.
Debt Factoring (External) This is when an invoice financier will buy a debt owed to a
business by a customer and collect the money themselves. They pay the business around 85%
of the money owed by the customer. Once they receive the money from the customer they pay
the business the remaining balance - with the business paying fees.
Hire Purchase (External) Often used by small businesses as a way of buying machinery. A
down payment may be required and then the business would repay the remainder of the price
on instalments over a period of time
Peer to Peer Lending (External) This method allows individuals to gain money without
having to go through a bank or financial institution. Many websites have been set up to match
individuals lenders and borrowers online
,Sale of assets (Internal) a business may be able to sell certain assets within the business
in order to raise finance. for example, machinery, land and buildings.
Loans (External) This is borrowed from a bank and must be repaid over a set amount of
time in regular instalments
Crowd Funding (External)A large number of people to raise money in order to fund a
project
Leasing (External) a business will gain the use of particular resources such as, property,
machinery in return doe regular payments. The business never owns the resource
Donations (External) Money or goods that are given to help an organisation
Trade Credit (External) A business will buy raw materials or fuel and pay for them at a
later date, usually within 30-90 days
,Grants (External) An amount of money that is given to an individual or a business for a
specific project or purpose
Mortgages (External) Usually a long term loan from a bank. The lender would need to use
land or property as security on the loan
Venture Capital (External) A type of funding for new or growing businesses. This type of
funding is provided by private investors
Net Cash Flow Total Cash Inflow - Total Cash Outflow
Closing Balance Opening balance + Net Cash Flow
Total Revenue Selling Price X Quantity Sold
Total Costs fixed costs + total variable costs
Profit Total Revenue - Total Costs
, Total contribution Sales Revenue - Total Variable Costs
Contribution (Per Unit) Selling Price - Variable Costs
Profit (using contribution) Contribution per unit x margin of safety
Break even output Fixed costs / contribution per unit
Margin of Safety Actual sales - break even level of output
Revenue Unit price X Quantity Sold
Gross Profit Sales revenue - cost of goods sold
Costs of goods sold Opening inventory + purchases - closing inventory
Correct Answers
Net Current Assets (Internal) The amount of money that a business has on hand in a
given year, or what they will have. Also known as working capital, it is calculated by subtracting
current liabilities from current assets.
Debt Factoring (External) This is when an invoice financier will buy a debt owed to a
business by a customer and collect the money themselves. They pay the business around 85%
of the money owed by the customer. Once they receive the money from the customer they pay
the business the remaining balance - with the business paying fees.
Hire Purchase (External) Often used by small businesses as a way of buying machinery. A
down payment may be required and then the business would repay the remainder of the price
on instalments over a period of time
Peer to Peer Lending (External) This method allows individuals to gain money without
having to go through a bank or financial institution. Many websites have been set up to match
individuals lenders and borrowers online
,Sale of assets (Internal) a business may be able to sell certain assets within the business
in order to raise finance. for example, machinery, land and buildings.
Loans (External) This is borrowed from a bank and must be repaid over a set amount of
time in regular instalments
Crowd Funding (External)A large number of people to raise money in order to fund a
project
Leasing (External) a business will gain the use of particular resources such as, property,
machinery in return doe regular payments. The business never owns the resource
Donations (External) Money or goods that are given to help an organisation
Trade Credit (External) A business will buy raw materials or fuel and pay for them at a
later date, usually within 30-90 days
,Grants (External) An amount of money that is given to an individual or a business for a
specific project or purpose
Mortgages (External) Usually a long term loan from a bank. The lender would need to use
land or property as security on the loan
Venture Capital (External) A type of funding for new or growing businesses. This type of
funding is provided by private investors
Net Cash Flow Total Cash Inflow - Total Cash Outflow
Closing Balance Opening balance + Net Cash Flow
Total Revenue Selling Price X Quantity Sold
Total Costs fixed costs + total variable costs
Profit Total Revenue - Total Costs
, Total contribution Sales Revenue - Total Variable Costs
Contribution (Per Unit) Selling Price - Variable Costs
Profit (using contribution) Contribution per unit x margin of safety
Break even output Fixed costs / contribution per unit
Margin of Safety Actual sales - break even level of output
Revenue Unit price X Quantity Sold
Gross Profit Sales revenue - cost of goods sold
Costs of goods sold Opening inventory + purchases - closing inventory
