Business Finance and Arithmetic — Important Questions

Purchase of machinery and equipment

Step 1: Start-up costs are expenses incurred initially when a business is started. Step 2: These include acquiring assets like machinery, equipment, furniture, and initial working capital. Step 3: Machinery and equipment are one-time purchases made before business operations begin. Step 4: Other options represent ongoing operational expenses. Option A (salary), B (raw materials), and D (utilities) are recurring operational costs, not start-up expenses.

Fixed Cost ÷ Gross Margin Per Unit

Step 1: Break-even point is where total revenue equals total expenses (no profit, no loss). Step 2: The formula calculates the quantity needed to cover all fixed costs. Step 3: Fixed Cost ÷ Gross Margin Per Unit gives the number of units to sell to break even. Step 4: Gross margin per unit represents the contribution each unit makes toward covering fixed costs. Other options don't represent the correct break-even calculation method.

It shows revenues, expenses, gains, and losses for a specific period

Step 1: Income Statement (also called Profit & Loss Statement) shows the profitability over a specific time period. Step 2: It includes all revenues earned, expenses incurred, gains, and losses. Step 3: It does NOT show cash receipts or cash payments - that's the cash flow statement. Step 4: It provides a comprehensive view of business performance, not just profit. Options A and C are wrong as they confuse it with cash flow statements. Option D is incomplete as it shows more than just profit.

Money coming into the business

Step 1: Inflow refers to receipts of money or money coming into the business. Step 2: Examples include sales receipts, owner's equity, loans received, interest earned, rent received. Step 3: It represents all sources of money entering the business operations. Step 4: This is opposite to outflow, which is money going out. Option A describes outflow, not inflow. Option C is too specific (only one source). Option D describes a specific expense, not general inflow.