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Page 1
Ans. It helps in setting profit goals and sales targets. In a manufacturing environment, it helps in determining the
products that are not contributing to meet the fixed expenses and thus bring up the item for discussion in
management meetings about its continuity. 2
Q. 4. What is sales mix ?
Ans. It is the proportion in which two or more products are sold. 1
Q. 5. Which is the method for calculating break-even point of sales mix ?
Ans. Contribution approach method. 1
Q. 6. What do you mean by Unit of Sales ?
Ans. Unit of Sales can be defined as a measure of what products are sold. 1
Q. 7. What do you mean by Gross Profit ?
Ans. Excess of Unit Price Over Unit Cost is known as the Unit Gross Profit or Unit Gross Margin. This represents the
business’s profit from selling a product or providing service before deducting fixed expenses such as salaries,
rent and other expenses.
Gross Profit = Unit Price – Unit Cost 2
Q. 8. What do you understand by Unit Cost / Variable Cost / Cost of goods sold ?
Ans. Cost of unit can be defined as the cost incurred by a company to produce, store and sell one unit of sale of a
particular product or service. 1
Q. 9. Give few examples of Variable Cost/Unit Cost.
Ans. Raw material, commission on sales, packing material, etc. 1
Q. 10. What is MRP ?
Ans. MRP (Maximum Retail Price) is a price at which shopkeeper sells the goods to the customers. 1
SHORT ANSWER TYPE QUESTIONS [3-4 Marks each]
Q. 1. A factory is engaged in manufacturing coolers. The following information is available to you :
Sales = ` 2,50,000
Direct Labour Cost (for 100 units) = ` 25,000
Direct Material Cost (for 100 units) = ` 62,500
Direct Expenses (for 100 units) = ` 12,500
Fixed cost = ` 75,000
Calculate : (a) Variable Cost per unit
(b) Total Cost
(c) Break-Even (CBSE 2013, 2010 Delhi)
Ans. (a) Variable cost per unit
Variable cost per unit
Variable cost per unit
Variable cost per unit
= Total cost - Fixed cost
No. of Units Produced
= ` 1,75,000 - `
75,000 100
= ` 1,000
Or
= Variable Cost / No. of units produced
= ` 25,000 + ` 62,500 + `12,500 = ` 1,000
100
(b) Total Cost = Variable cost + Fixed cost
= (` 25,000+` 62,500 +` 12,500) + ` 75,000
= ` 1,75,000
(c) Break-even =
Fixed cost
Selling price per unit - Variable cost per unit
=
` 75,000 = 50 units
` 2,500 - 1,000
Page 2
Ans. It helps in setting profit goals and sales targets. In a manufacturing environment, it helps in determining the
products that are not contributing to meet the fixed expenses and thus bring up the item for discussion in
management meetings about its continuity. 2
Q. 4. What is sales mix ?
Ans. It is the proportion in which two or more products are sold. 1
Q. 5. Which is the method for calculating break-even point of sales mix ?
Ans. Contribution approach method. 1
Q. 6. What do you mean by Unit of Sales ?
Ans. Unit of Sales can be defined as a measure of what products are sold. 1
Q. 7. What do you mean by Gross Profit ?
Ans. Excess of Unit Price Over Unit Cost is known as the Unit Gross Profit or Unit Gross Margin. This represents the
business’s profit from selling a product or providing service before deducting fixed expenses such as salaries,
rent and other expenses.
Gross Profit = Unit Price – Unit Cost 2
Q. 8. What do you understand by Unit Cost / Variable Cost / Cost of goods sold ?
Ans. Cost of unit can be defined as the cost incurred by a company to produce, store and sell one unit of sale of a
particular product or service. 1
Q. 9. Give few examples of Variable Cost/Unit Cost.
Ans. Raw material, commission on sales, packing material, etc. 1
Q. 10. What is MRP ?
Ans. MRP (Maximum Retail Price) is a price at which shopkeeper sells the goods to the customers. 1
SHORT ANSWER TYPE QUESTIONS [3-4 Marks each]
Q. 1. A factory is engaged in manufacturing coolers. The following information is available to you :
Sales = ` 2,50,000
Direct Labour Cost (for 100 units) = ` 25,000
Direct Material Cost (for 100 units) = ` 62,500
Direct Expenses (for 100 units) = ` 12,500
Fixed cost = ` 75,000
Calculate : (a) Variable Cost per unit
(b) Total Cost
(c) Break-Even (CBSE 2013, 2010 Delhi)
Ans. (a) Variable cost per unit
Variable cost per unit
Variable cost per unit
Variable cost per unit
= Total cost - Fixed cost
No. of Units Produced
= ` 1,75,000 - `
75,000 100
= ` 1,000
Or
= Variable Cost / No. of units produced
= ` 25,000 + ` 62,500 + `12,500 = ` 1,000
100
(b) Total Cost = Variable cost + Fixed cost
= (` 25,000+` 62,500 +` 12,500) + ` 75,000
= ` 1,75,000
(c) Break-even =
Fixed cost
Selling price per unit - Variable cost per unit
=
` 75,000 = 50 units
` 2,500 - 1,000
Q. 2. What are the assumptions made for calculation of break-even point for sales
mix ? Ans. (i) The proportion of sales mix must be pre-determined.
(ii) The sales mix must not change within the relevant time period.
(iii) All costs can be categorized as variable or fixed.
(iv) Sales price per unit, variable cost per unit and total fixed cost are constant.
(v) All units produced are sold. (Any three) 3
Q. 3. Illustrate with the help of an example the concept of Break-Even-Point. (CBSE 2012, Comptt.)
Ans. The Break Even Point is the sales volume at which there is neither profit nor loss, cost being equal to revenue.
Break Even Point is a neutral point. Sales below this point shows loss and sales above this point shows profit.
60
Profit
)
50
BEP
.
s
40
R
MOS
0
0
0
30
n
i
Fixed Cost
(
LOSS
t
s
20
o
c
10 Area of Fixed Cost
0 10 20 30 40 50 60 70
(Sales in 000)
4
Q. 4. A grocery store sold in a day different quantity for different products at the price indicated against them :
Products Price per unit (`) Quantity sold
Dal 40/kg 35 (kg)
Chilli powder 40/kg 10 (kg)
Salt 5/packets 5 (packets)
Chips 15/packets 10 (packets)
Juice Pack 5/packets 5 (packets)
The shopkeeper also found out, based on the number of bills issued by him, that there were 50 customers.
If customer is the unit of sale, what is the “Unit Price” in the above case ? If the cost of each grocery item is
75% of its selling price, calculate the “Unit Cost” and the “Gross margin per unit of sale.” (SQP)
Ans. Unit Price =
Total Billed Amount
Number of Customers
= [(` 40×35) + (`40×10) + (`5×5) + (`15×10) + (`5×5)]
50
= ` 40
Unit cost = ` 40 × 75 / 100
Unit cost = ` 30
Gross Margin = Unit price – Unit cost
= ` 40 – ` 30
= ` 10. 4
Q. 5. Explain the concepts of Cost, Revenue and Break-Even-Point. Also explain how Break-Even point is
calculated. (CBSE 2011 A.I.)
Ans. Cost : The ‘term’ cost refers to the amount of expenditure incurred on, or attributable to a given
thing. Cost determination is an important function of the entrepreneur. The major element of cost
are :
1. Cost of materials.
2. Cost of labour.
3. Cost of overheads and other expenses.
Page 3
Ans. It helps in setting profit goals and sales targets. In a manufacturing environment, it helps in determining the
products that are not contributing to meet the fixed expenses and thus bring up the item for discussion in
management meetings about its continuity. 2
Q. 4. What is sales mix ?
Ans. It is the proportion in which two or more products are sold. 1
Q. 5. Which is the method for calculating break-even point of sales mix ?
Ans. Contribution approach method. 1
Q. 6. What do you mean by Unit of Sales ?
Ans. Unit of Sales can be defined as a measure of what products are sold. 1
Q. 7. What do you mean by Gross Profit ?
Ans. Excess of Unit Price Over Unit Cost is known as the Unit Gross Profit or Unit Gross Margin. This represents the
business’s profit from selling a product or providing service before deducting fixed expenses such as salaries,
rent and other expenses.
Gross Profit = Unit Price – Unit Cost 2
Q. 8. What do you understand by Unit Cost / Variable Cost / Cost of goods sold ?
Ans. Cost of unit can be defined as the cost incurred by a company to produce, store and sell one unit of sale of a
particular product or service. 1
Q. 9. Give few examples of Variable Cost/Unit Cost.
Ans. Raw material, commission on sales, packing material, etc. 1
Q. 10. What is MRP ?
Ans. MRP (Maximum Retail Price) is a price at which shopkeeper sells the goods to the customers. 1
SHORT ANSWER TYPE QUESTIONS [3-4 Marks each]
Q. 1. A factory is engaged in manufacturing coolers. The following information is available to you :
Sales = ` 2,50,000
Direct Labour Cost (for 100 units) = ` 25,000
Direct Material Cost (for 100 units) = ` 62,500
Direct Expenses (for 100 units) = ` 12,500
Fixed cost = ` 75,000
Calculate : (a) Variable Cost per unit
(b) Total Cost
(c) Break-Even (CBSE 2013, 2010 Delhi)
Ans. (a) Variable cost per unit
Variable cost per unit
Variable cost per unit
Variable cost per unit
= Total cost - Fixed cost
No. of Units Produced
= ` 1,75,000 - `
75,000 100
= ` 1,000
Or
= Variable Cost / No. of units produced
= ` 25,000 + ` 62,500 + `12,500 = ` 1,000
100
(b) Total Cost = Variable cost + Fixed cost
= (` 25,000+` 62,500 +` 12,500) + ` 75,000
= ` 1,75,000
(c) Break-even =
Fixed cost
Selling price per unit - Variable cost per unit
=
` 75,000 = 50 units
` 2,500 - 1,000
Q. 2. What are the assumptions made for calculation of break-even point for sales
mix ? Ans. (i) The proportion of sales mix must be pre-determined.
(ii) The sales mix must not change within the relevant time period.
(iii) All costs can be categorized as variable or fixed.
(iv) Sales price per unit, variable cost per unit and total fixed cost are constant.
(v) All units produced are sold. (Any three) 3
Q. 3. Illustrate with the help of an example the concept of Break-Even-Point. (CBSE 2012, Comptt.)
Ans. The Break Even Point is the sales volume at which there is neither profit nor loss, cost being equal to revenue.
Break Even Point is a neutral point. Sales below this point shows loss and sales above this point shows profit.
60
Profit
)
50
BEP
.
s
40
R
MOS
0
0
0
30
n
i
Fixed Cost
(
LOSS
t
s
20
o
c
10 Area of Fixed Cost
0 10 20 30 40 50 60 70
(Sales in 000)
4
Q. 4. A grocery store sold in a day different quantity for different products at the price indicated against them :
Products Price per unit (`) Quantity sold
Dal 40/kg 35 (kg)
Chilli powder 40/kg 10 (kg)
Salt 5/packets 5 (packets)
Chips 15/packets 10 (packets)
Juice Pack 5/packets 5 (packets)
The shopkeeper also found out, based on the number of bills issued by him, that there were 50 customers.
If customer is the unit of sale, what is the “Unit Price” in the above case ? If the cost of each grocery item is
75% of its selling price, calculate the “Unit Cost” and the “Gross margin per unit of sale.” (SQP)
Ans. Unit Price =
Total Billed Amount
Number of Customers
= [(` 40×35) + (`40×10) + (`5×5) + (`15×10) + (`5×5)]
50
= ` 40
Unit cost = ` 40 × 75 / 100
Unit cost = ` 30
Gross Margin = Unit price – Unit cost
= ` 40 – ` 30
= ` 10. 4
Q. 5. Explain the concepts of Cost, Revenue and Break-Even-Point. Also explain how Break-Even point is
calculated. (CBSE 2011 A.I.)
Ans. Cost : The ‘term’ cost refers to the amount of expenditure incurred on, or attributable to a given
thing. Cost determination is an important function of the entrepreneur. The major element of cost
are :
1. Cost of materials.
2. Cost of labour.
3. Cost of overheads and other expenses.
Revenue : Revenue refers to the money receipt of a firm from the sale of its output.
Total revenue, marginal revenue and arrange revenue are of its types. 2
Break Even Point : The business is at break even when its value is equal to its total cost. The break even point
(B.E.P.) is the sales volume at which there is neither profit nor loss. Cost being equal to revenue break even
point is a neutral point . Sales below this point show loss and sales excess of this point show profit. It is the
relationship among cost of production, volume of production, profit & the sales value.
At the BEP, the revenue equals the cost. The formula for computing B.E.P. is simple.
Total revenue (R) = Price (P) × number of units sold (q)
Total cost (C) = Fixed costs (F) + (q × variable cost per unit.)
By definition, BEP R = C or P × q = F + (q × V )
BEP of output =
F
Contribution per unit
Contribution = selling price – variable cost
BEP on sales = Fixed costs ×
Selling price per unit
Contribution per unit
2
Q. 6. A factory is engaged in manufacturing shirts. The following information is available to you :
Sales ` 4,00,000
Direct Labour Cost (2,000 units) ` 40,000
Direct Material Cost (2,000 units) ` 1,00,000
Direct Expenses (2,000 units) ` 20,000
Fixed Cost ` 1,20,000
Find out :
(a) Variable cost per unit
(b) Total cost
(c) Quantity to be sold at Break-Even Point. (CBSE 2010 Delhi)
Ans. (a) Variable cost per unit = Direct labour cost + Direct material cost + Direct expenses /
No. of units
= ` 40,000 + ` 1,00,000 + ` 20,000 /2,000
= ` 1,60,000/ ` 2,000
= ` 80 per unit
(b) Total cost = Fixed cost + Variable cost
= ` 1,20,000 + ` 1,60,000
= ` 2,80,000
(c)
Sales at BEP =
Fixed cost
Selling price - Variable cost per unit
= `1,20,000 = `1,20,000
`200 - `80 `120
= 1000 units
3
Q. 7. What are Financial Ratios ? What do they indicate ? (CBSE 2009 Comptt.)
Ans. Financial ratios are devices for measuring financial conditions of financial changes. It is the relationship between
two accounting figures expressed mathematically, which shows meaningful relations with each other.
They indicate as under :
(i) The long term financial position of a business.
(ii) The profitability of the business activity.
(iii) Return on the investment done by the firm.
(iv) The direction of the financial changes required. 4
Q. 8. What is Net Profit Ratio ? What does it indicate ?
Ans. The main objective of a business is to earn maximum profit by using minimum resources. It establishes the
relationship between net profit before taxes and net sales turnover. It is usually expressed as a percentage. It
is calculated as follows :
Page 4
Ans. It helps in setting profit goals and sales targets. In a manufacturing environment, it helps in determining the
products that are not contributing to meet the fixed expenses and thus bring up the item for discussion in
management meetings about its continuity. 2
Q. 4. What is sales mix ?
Ans. It is the proportion in which two or more products are sold. 1
Q. 5. Which is the method for calculating break-even point of sales mix ?
Ans. Contribution approach method. 1
Q. 6. What do you mean by Unit of Sales ?
Ans. Unit of Sales can be defined as a measure of what products are sold. 1
Q. 7. What do you mean by Gross Profit ?
Ans. Excess of Unit Price Over Unit Cost is known as the Unit Gross Profit or Unit Gross Margin. This represents the
business’s profit from selling a product or providing service before deducting fixed expenses such as salaries,
rent and other expenses.
Gross Profit = Unit Price – Unit Cost 2
Q. 8. What do you understand by Unit Cost / Variable Cost / Cost of goods sold ?
Ans. Cost of unit can be defined as the cost incurred by a company to produce, store and sell one unit of sale of a
particular product or service. 1
Q. 9. Give few examples of Variable Cost/Unit Cost.
Ans. Raw material, commission on sales, packing material, etc. 1
Q. 10. What is MRP ?
Ans. MRP (Maximum Retail Price) is a price at which shopkeeper sells the goods to the customers. 1
SHORT ANSWER TYPE QUESTIONS [3-4 Marks each]
Q. 1. A factory is engaged in manufacturing coolers. The following information is available to you :
Sales = ` 2,50,000
Direct Labour Cost (for 100 units) = ` 25,000
Direct Material Cost (for 100 units) = ` 62,500
Direct Expenses (for 100 units) = ` 12,500
Fixed cost = ` 75,000
Calculate : (a) Variable Cost per unit
(b) Total Cost
(c) Break-Even (CBSE 2013, 2010 Delhi)
Ans. (a) Variable cost per unit
Variable cost per unit
Variable cost per unit
Variable cost per unit
= Total cost - Fixed cost
No. of Units Produced
= ` 1,75,000 - `
75,000 100
= ` 1,000
Or
= Variable Cost / No. of units produced
= ` 25,000 + ` 62,500 + `12,500 = ` 1,000
100
(b) Total Cost = Variable cost + Fixed cost
= (` 25,000+` 62,500 +` 12,500) + ` 75,000
= ` 1,75,000
(c) Break-even =
Fixed cost
Selling price per unit - Variable cost per unit
=
` 75,000 = 50 units
` 2,500 - 1,000
Q. 2. What are the assumptions made for calculation of break-even point for sales
mix ? Ans. (i) The proportion of sales mix must be pre-determined.
(ii) The sales mix must not change within the relevant time period.
(iii) All costs can be categorized as variable or fixed.
(iv) Sales price per unit, variable cost per unit and total fixed cost are constant.
(v) All units produced are sold. (Any three) 3
Q. 3. Illustrate with the help of an example the concept of Break-Even-Point. (CBSE 2012, Comptt.)
Ans. The Break Even Point is the sales volume at which there is neither profit nor loss, cost being equal to revenue.
Break Even Point is a neutral point. Sales below this point shows loss and sales above this point shows profit.
60
Profit
)
50
BEP
.
s
40
R
MOS
0
0
0
30
n
i
Fixed Cost
(
LOSS
t
s
20
o
c
10 Area of Fixed Cost
0 10 20 30 40 50 60 70
(Sales in 000)
4
Q. 4. A grocery store sold in a day different quantity for different products at the price indicated against them :
Products Price per unit (`) Quantity sold
Dal 40/kg 35 (kg)
Chilli powder 40/kg 10 (kg)
Salt 5/packets 5 (packets)
Chips 15/packets 10 (packets)
Juice Pack 5/packets 5 (packets)
The shopkeeper also found out, based on the number of bills issued by him, that there were 50 customers.
If customer is the unit of sale, what is the “Unit Price” in the above case ? If the cost of each grocery item is
75% of its selling price, calculate the “Unit Cost” and the “Gross margin per unit of sale.” (SQP)
Ans. Unit Price =
Total Billed Amount
Number of Customers
= [(` 40×35) + (`40×10) + (`5×5) + (`15×10) + (`5×5)]
50
= ` 40
Unit cost = ` 40 × 75 / 100
Unit cost = ` 30
Gross Margin = Unit price – Unit cost
= ` 40 – ` 30
= ` 10. 4
Q. 5. Explain the concepts of Cost, Revenue and Break-Even-Point. Also explain how Break-Even point is
calculated. (CBSE 2011 A.I.)
Ans. Cost : The ‘term’ cost refers to the amount of expenditure incurred on, or attributable to a given
thing. Cost determination is an important function of the entrepreneur. The major element of cost
are :
1. Cost of materials.
2. Cost of labour.
3. Cost of overheads and other expenses.
Revenue : Revenue refers to the money receipt of a firm from the sale of its output.
Total revenue, marginal revenue and arrange revenue are of its types. 2
Break Even Point : The business is at break even when its value is equal to its total cost. The break even point
(B.E.P.) is the sales volume at which there is neither profit nor loss. Cost being equal to revenue break even
point is a neutral point . Sales below this point show loss and sales excess of this point show profit. It is the
relationship among cost of production, volume of production, profit & the sales value.
At the BEP, the revenue equals the cost. The formula for computing B.E.P. is simple.
Total revenue (R) = Price (P) × number of units sold (q)
Total cost (C) = Fixed costs (F) + (q × variable cost per unit.)
By definition, BEP R = C or P × q = F + (q × V )
BEP of output =
F
Contribution per unit
Contribution = selling price – variable cost
BEP on sales = Fixed costs ×
Selling price per unit
Contribution per unit
2
Q. 6. A factory is engaged in manufacturing shirts. The following information is available to you :
Sales ` 4,00,000
Direct Labour Cost (2,000 units) ` 40,000
Direct Material Cost (2,000 units) ` 1,00,000
Direct Expenses (2,000 units) ` 20,000
Fixed Cost ` 1,20,000
Find out :
(a) Variable cost per unit
(b) Total cost
(c) Quantity to be sold at Break-Even Point. (CBSE 2010 Delhi)
Ans. (a) Variable cost per unit = Direct labour cost + Direct material cost + Direct expenses /
No. of units
= ` 40,000 + ` 1,00,000 + ` 20,000 /2,000
= ` 1,60,000/ ` 2,000
= ` 80 per unit
(b) Total cost = Fixed cost + Variable cost
= ` 1,20,000 + ` 1,60,000
= ` 2,80,000
(c)
Sales at BEP =
Fixed cost
Selling price - Variable cost per unit
= `1,20,000 = `1,20,000
`200 - `80 `120
= 1000 units
3
Q. 7. What are Financial Ratios ? What do they indicate ? (CBSE 2009 Comptt.)
Ans. Financial ratios are devices for measuring financial conditions of financial changes. It is the relationship between
two accounting figures expressed mathematically, which shows meaningful relations with each other.
They indicate as under :
(i) The long term financial position of a business.
(ii) The profitability of the business activity.
(iii) Return on the investment done by the firm.
(iv) The direction of the financial changes required. 4
Q. 8. What is Net Profit Ratio ? What does it indicate ?
Ans. The main objective of a business is to earn maximum profit by using minimum resources. It establishes the
relationship between net profit before taxes and net sales turnover. It is usually expressed as a percentage. It
is calculated as follows :
Net Profit Ratio = Net Profit before taxes
Sales turnover
It is an indicator of the profitability of the business activity. Higher the ratio the better it is. It measures the rate
of return on sales. It enables to measure the overall efficiency of business. While comparing with the last year’s
ratio, if it increases, it is treated as an improvement in overall efficiency of the business. 3
Q. 9. What is Margin of Safety ? How is it calculated ?
Ans. The Margin of Safety in profit analysis means the excess of actual sales over the B.E.P. sales. It can be expressed
in rupees or in other quantity unit or as a ratio.
Margin of Safety = Actual Sales – B.E.P. Sales
Or MOS =
Profit
3
P/V ratio
Q. 10. What is Break Even Points ? Why should an entrepreneur know about BEP ?
Ans. The business break even when its value is equal to its total cost. The Break Even Point (BEP) is the sales volume
at which there is neither profit nor loss, cost being equal to revenue. Break Even Point is a neutral point. Sales
below this point show loss and sales above of this point show profit. It is the relationship among cost of
production, volume of production, profit and the sales value.
The entrepreneur should know B.E.P. as it helps in :
(i) Forecast : He can forecast about profit fairly and accurately.
(ii) Cost estimation : He can ascertain costs, sales & profits at different levels of activity.
(iii) Price Policy : For taking decision regarding price policy. 4
Q. 11. What does total cost include ?
Ans. Total cost includes variable costs and fixed costs. Variable costs vary directly with the level of output. It includes the
expenditure on raw materials, transportation, etc. Fixed costs are not dependent on the level of output.
These are period costs. They include interest, rent, salary of permanent workers, etc. 3
Q. 12. Write unit of sale in each case.
Business Items sold/serviced Unit of sale
Garment shop T-shirt ?
Textile shop Fabric ?
Restaurant Food items ?
Ans.
Business Items sold/serivced Unit of Sale
Garment shop T-shirt Customers
Textile shop Fabric Customers
Restaurant Food items Dinner
3
Q. 13. Is Break-even Analysis useful to achieve the target level of profit ?
Ans. Yes, Break-even Analysis is useful to achieve target level of profit. Organizations identify those products which
yield the highest contribution. Break-even Analysis helps the firm in selecting and ranking those products,
based on contribution, to achieve the targeted level of profit. 4
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FAQs on Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 - Additional Study Material for Commerce
| 1. What is business arithmetic and why is it important in entrepreneurship? |  |
Ans. Business arithmetic refers to the use of mathematical calculations and techniques in business operations and decision-making. It involves various mathematical concepts such as addition, subtraction, multiplication, division, percentages, ratios, and more. Business arithmetic is important in entrepreneurship as it helps in financial planning, budgeting, analyzing profitability, pricing products, managing inventory, and making informed business decisions based on accurate calculations.
| 2. How can business arithmetic help entrepreneurs in managing their finances? | |
Ans. Business arithmetic plays a crucial role in helping entrepreneurs manage their finances effectively. By using mathematical calculations, entrepreneurs can track their income and expenses, calculate profits and losses, analyze cash flow, determine break-even points, and assess the financial health of their business. It enables entrepreneurs to make informed financial decisions, set realistic goals, and improve overall financial management.
| 3. What are some key mathematical concepts used in business arithmetic? | |
Ans. Some key mathematical concepts used in business arithmetic include:
1. Percentages: Calculating discounts, markups, profit margins, and sales growth rates.
2. Ratios: Analyzing financial ratios like the current ratio, quick ratio, and debt-to-equity ratio.
3. Interest and Compound Interest: Calculating interest on loans, investments, and savings accounts.
4. Break-even Analysis: Determining the point at which total revenue equals total costs.
5. Depreciation: Calculating the decrease in value of assets over time.
6. Time Value of Money: Evaluating the present and future value of money over a given period.
Understanding and applying these concepts helps entrepreneurs in various financial calculations and decision-making processes.
| 4. How can entrepreneurs use business arithmetic to analyze profitability? | |
Ans. Entrepreneurs can use business arithmetic to analyze profitability by calculating key financial metrics such as gross profit margin, net profit margin, return on investment (ROI), and break-even point. By accurately calculating revenue, costs, and expenses, entrepreneurs can determine the profitability of their products or services. They can identify areas of improvement, make pricing decisions, assess the impact of cost changes, and evaluate the viability of business strategies. Business arithmetic helps entrepreneurs assess the overall profitability of their business and make informed decisions to enhance financial performance.
| 5. Can business arithmetic be useful for small-scale entrepreneurs as well? | |
Ans. Yes, business arithmetic is equally useful for small-scale entrepreneurs. In fact, it is crucial for their success. Small-scale entrepreneurs often have limited resources and need to make every decision count. Business arithmetic can help them manage their finances efficiently, track costs and revenues, calculate profits, analyze pricing strategies, and make informed decisions to grow their business. By using mathematical calculations and techniques, small-scale entrepreneurs can optimize their operations, improve cash flow, and maximize profitability. Business arithmetic is a valuable tool for all entrepreneurs, regardless of the scale of their business.
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The content of Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 is prepared as per the latest Commerce syllabus.
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