Exam-style practice (harder): Business Studies multiple choice quiz

0.5 : 1

0.67 : 1

2.5 : 1

1.5 : 1

1.5 : 1; it relies more on debt than equity, which raises risk if interest rates rise.

0.67 : 1; it relies more on equity than debt, so its financial risk is low.

1.5 : 1; it shows strong liquidity, as the business can meet its short-term debts.

0.6 : 1; it is lowly geared, so it has capacity to borrow more safely.

Gross profit ratio 60%, net profit ratio 15%

Gross profit ratio 40%, net profit ratio 25%

Gross profit ratio 40%, net profit ratio 15%

Gross profit ratio 40%, net profit ratio 37.5%

Turnover is 0.1 times a year, so debts take about 3650 days to collect.

Turnover is 10 times a year, so debts take about 37 days to collect on average.

Turnover is 10 times a year, so debts take about 10 days to collect on average.

Turnover is 10 times a year, so customers pay faster than the 30-day terms.

Price skimming, setting a high price to recover development costs early

Penetration pricing, setting a low price to attract customers from rivals

Prestige pricing, setting a high price to signal superior quality

Price leadership, setting the price that competitors then follow

Growth; increase informative advertising to build product awareness.

Introduction; use a skimming price to recover development costs.

Decline; withdraw the product at once because profits are falling.

Maturity; use extension strategies, such as new features or new markets.

An enterprise agreement

An individual employment contract

A modern award

The National Employment Standards

Turnover is 5%, below the industry average, showing high job satisfaction.

Turnover is 25%, calculated as 30 leavers divided by the 120 staff remaining.

Turnover is 20%, above the industry average, which may signal low satisfaction.

Turnover is 20%, above the industry average, which shows the business is growing.

Lower cost per unit, but less flexibility to customise orders

Higher cost per unit, but more flexibility to customise orders

Lower cost per unit and more customisation for each customer

No change in cost per unit, since the same inputs are used

Holding costs rise, because more frequent deliveries need more storage.

Stock-outs become less likely, because components arrive only when needed.

The business must now keep large safety stocks to make JIT work.

Holding costs fall, but the business is more exposed to supplier delays.

Closing balance -$5 000; this proves that the business made a loss.

Closing balance -$5 000; it may need short-term finance such as an overdraft.

Closing balance $45 000; the business has surplus cash to invest.

Closing balance -$25 000; the business should now arrange a long-term loan.

A bank overdraft, repaid from future sales

Trade credit from the business's suppliers

A five-year loan or lease for the van

Factoring the business's accounts receivable

Misleading or deceptive conduct under the Australian Consumer Law

Bait advertising under the Australian Consumer Law

A breach of the National Employment Standards

Price discrimination, which is unlawful in all circumstances

Net profit rose each year, so profitability relative to sales improved.

Costs rose faster than sales, so each dollar of sales earned less profit.

The falling net profit ratio shows that the business's liquidity weakened.

Sales growth slowed each year, and this caused net profit to fall.