INTRODUCTION TO FINANCE

Question 1

Capital Expenditure

Answer 1

Money spent on fixed assets, assets that last a long time and can be re-used.
These fixed asssets are needed for the purpose of generating income for the business over the long term.

Question 2

Revenue Expenditure

Answer 2

Revenue expenditure refers to the costs a business incurs through its regular operations, such as wages, utilities, and repairs. These costs are charged to expenses immediately and do not result in acquiring long-term assets. They impact the business’s operating income within the same period they’re incurred.

Question 3

Collateral

Answer 3

Due to the high initial cost,most fixed asses can be used as collateral (finanical security pledged for repayment of a particular cource of finance such as bank loans)

Question 4

Why do businesses need to make sure that they don’t have consistent high revenue expenditures?

Answer 4

Because it makes it difficult for them to build sufficient capital to make long-term investments. Also it will be harder for them to get out of a sudden situation crisis.