Lesson 6.2.1

6.2.1 Financial Terms and Calculations Quiz: NCFE Business & Enterprise, Unit 6

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

This lesson is the toolkit of core financial calculations: gross and net profit, margins, contribution, break-even output, margin of safety and closing cash balances. It also introduces the three main financial documents and explains why a balance sheet always balances. Expect worked numerical examples throughout.

Key points

  • Gross profit is revenue minus the direct cost of the goods sold; net profit is what remains once operating expenses are also deducted.
  • Contribution per unit is selling price minus variable cost, and break-even output is fixed costs divided by that contribution.
  • Margin of safety is current output minus break-even output, and it can also be shown as a percentage of expected sales.
  • Raising the price or cutting variable cost lowers break-even output, whereas higher rent or dearer supplies push it up.
  • Margins are percentages of revenue, so a known profit and margin can be rearranged to find revenue or cost of sales.
  • An income statement covers a period of trading, while a balance sheet is a snapshot of assets, liabilities and capital on one date.
  • A closing cash balance is the opening balance plus inflows minus outflows, and it becomes next month's opening balance.

Key terms

Gross profit
Sales revenue minus the cost of making or buying the goods that were sold.
Net profit
The profit left after all costs and expenses have been taken from revenue.
Contribution per unit
Selling price minus variable cost, the amount each sale adds towards covering fixed costs.
Break-even output
The number of units that must be sold for total revenue to equal total costs.
Margin of safety
How far sales can fall below current levels before the business starts making a loss.
Liability
A debt the business owes to someone else, such as a loan or unpaid supplier bill.
Current asset
Something the business expects to turn into cash or use up within twelve months.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

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The 20 questions

  1. A firm sells 1,000 units at £50 each. Variable costs are £20 per unit and fixed costs are £10,000. What is its gross profit?

    • £50,000
    • £20,000
    • £30,000
    • £40,000

  2. A firm has fixed costs of £25,000. Each unit sells for £80 and costs £30 in variable costs. What is its break-even point in units?

    • 500 units
    • 313 units
    • 227 units
    • 833 units

  3. A firm's quarterly sales revenue was £200,000. Cost of sales was £120,000 and operating expenses were £50,000. What was its net profit?

    • £150,000
    • £80,000
    • £30,000
    • £130,000

  4. A firm has sales revenue of £80,000 and a gross profit margin of 60%. What is its cost of sales?

    • £32,000
    • £50,000
    • £48,000
    • £128,000

  5. A firm's break-even output is 1,500 units and it currently produces 2,000 units. What is its margin of safety in units?

    • 500 units
    • 1,500 units
    • 3,500 units
    • 2,000 units

  6. Which action will lower a firm's break-even output?

    • Raising selling price
    • Lowering selling price
    • Raising fixed costs
    • Raising variable costs

  7. A firm made a net profit of £50,000 last year. That was a net profit margin of 25%. What was its sales revenue?

    • £150,000
    • £12,500
    • £200,000
    • £62,500

  8. Which financial document reports a firm's revenue, costs and profit over a trading year?

    • Cash flow forecast
    • Income statement
    • Break-even chart
    • Year-end balance sheet

  9. A firm expects to sell 5,000 units and breaks even at 3,000 units. What is its margin of safety as a percentage of expected sales?

    • 167%
    • 60%
    • 40%
    • 67%

  10. What is selling price minus variable cost per unit called?

    • Break-even output
    • Contribution per unit
    • Gross profit
    • Net profit margin

  11. Which accounting equation ensures both sides of a balance sheet always balance?

    • Capital = Cash + Stock
    • Assets = Revenue - Costs
    • Assets = Liabilities + Equity
    • Profit = Income - Expenses

  12. What does selling fewer units than the break-even output mean?

    • Clearing all debts
    • Maximising revenue
    • Trading at a loss
    • Making a profit

  13. Which section of a Statement of Financial Position lists items the firm expects to turn into cash within twelve months?

    • Current assets
    • Non-current assets
    • Current liabilities
    • Owners' capital

  14. Which action creates a wider margin of safety?

    • Cutting variable costs
    • Lowering selling price
    • Raising fixed costs
    • Cutting sales volume

  15. A business starts March with £2,000 in the bank, receives £9,000 and pays out £7,500. What is its closing balance?

    • £3,500
    • £11,000
    • £18,500
    • £1,500

  16. Over what time frame does an income statement measure performance?

    • A calendar week
    • A single day
    • A set trading year
    • Five working years

  17. Which term describes money that a business owes to others?

    • Capital
    • Liability
    • Asset
    • Revenue

  18. What causes a business to make a loss in a trading year?

    • Costs exceeding revenue
    • High cash reserves
    • Low fixed costs
    • Revenue exceeding costs

  19. A firm sells 300 hoodies at £20 each. Its total costs for the period are £4,800. What profit does it make?

    • £4,800
    • £1,200
    • £6,000
    • £10,800

  20. What does reporting a net loss for the financial year indicate?

    • Cash balances increased
    • Revenue exceeded expenses
    • Expenses exceeded revenue
    • Assets exceeded liabilities

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