How is profit defined in a business?

Total sales revenue minus total costs

Total costs plus total sales revenue

Total costs minus total sales revenue

Total assets minus total liabilities

Why is profitability important for directors and managers?

To ensure timely payments to suppliers

To gauge business success and shape future objectives and strategy

To negotiate higher wages for employees

To reduce the business's credit rating

What is one reason employees might be interested in a company's profitability?

To assess the company's ability to repay loans

To gauge the potential for improved working conditions

To evaluate the company's capacity to settle short-term obligations

To ensure efficient production and delivery processes

What does liquidity refer to in a business?

The earnings of a company after deducting total costs from total sales revenue

The capacity of a business to settle its short-term obligations

The ability to generate profit from invested capital resources

The total value of assets owned by a business

What might happen if a business is unable to repay an overdraft?

Suppliers may delay delivery of raw materials

Customers may lose confidence in the supplier

Banking facilities may be withdrawn

Investors may scrutinize the business extensively

Why do suppliers prioritize liquidity in a business?

To ensure the business can repay loans

To evaluate potential investment opportunities

To ensure the business can settle payments promptly for goods or services rendered

To assess the business's capacity to generate profit

What can creditors do if a business is illiquid?

Negotiate higher wages for employees

Ensure efficient production and delivery processes

Enforce cessation of trading activities and compel the sale of assets

Evaluate the business's potential for future investment

What type of information do financial providers like banks require from a business?

Evidence indicating the business's capacity to repay loans or overdrafts

The business's total sales revenue and total costs

The percentage of sales revenue that becomes profit

The business's ability to negotiate higher wages for employees

How can profitability be assessed across different time periods?

By evaluating the business's capacity to settle short-term obligations

By assessing the business's ability to negotiate higher wages

By presenting profitability as a percentage

By evaluating potential investment opportunities

What is one way profitability can be defined?

The capacity of a business to settle its short-term obligations

How effectively a business converts sales revenue into profit

The ability of a business to ensure efficient production processes

The business's capacity to repay loans or overdrafts

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