Chapter 21

Question 1

Start-up capital

Answer 1

The finance required by a new business to pay for the essential fixed assets
and current assets so that it can start trading.

Question 2

Working capital

Answer 2

Capital available to a business in the short term to pay for day-to-day expenses.

Question 3

Capital expenditure

Answer 3

The money spent on non-current assets (fixed assets) lasting more than one year.

Question 4

Revenue expenditure

Answer 4

Money spent on day-to-day expenses, e.g. wages, raw materials.

Question 5

Internal finance

Answer 5

Finance from within the business itself.

Question 6

External finance

Answer 6

Finance from sources outside of and separate from the business.

Question 7

Micro-finance

Answer 7

This provides financial services to poor people who cannot use traditiona
banks, e.g. small loans

Question 8

Short-term source of finance

Answer 8

Finance that must be paid back within a year and includes: overdraft facility,
trade credits, factoring.

Question 9

Long-term source of finance

Answer 9

Funding obtained for a time frame exceeding one year in duration and
includes: owner’s savings/share capital; loans; debentures; a mortgage; hire
purchase or leasing; grants.