Finance

Question 1

Capital expenditure

Answer 1

Finances spent on fixed assets

Question 2

Revenue expenditure

Answer 2

Finances spent on daily operations

Question 3

Examples of capital expenditure

Answer 3

• capital
• Land
• vehicles
  -furniture

Question 4

Examples of revenue expenditures

Answer 4

• electrical bills
• insurance
  -wages and salaries
• supplies and raw materials

Question 5

Collateral

Answer 5

Assets which look good to investors and and the bank

Question 6

Internal sources of finance

Answer 6

Money or funds that come from within the business

Question 7

Business angels

Answer 7

Extremely wealthy individuals who invest their own money into small/ medium sized businesses which have growth potential

Question 8

Crowd funding

Answer 8

The practice of easing finance for a business venture or project by getting small amounts of money from large numbers of people , usually though online platforms

Question 9

External sources of finance

Answer 9

When the funds are sourced form outside the business

Question 10

Internal public offering ( IPO)

Answer 10

When a business converting its legal status to a publicly traded company by selling shares on the stock market for the first time

Question 11

Internal sources of finance

Answer 11

Funds generated from within the business

Question 12

Leasing

Answer 12

Form of hiring whereby a lessee pays rental income to hire assets from the lessor , the legal owner of the asset .

Question 13

Loan capital ( debt capital )

Answer 13

Medium to long term sources of interest baring finance , obtained from commercial lenders , like banks

Question 14

Long term sources of finance

Answer 14

Finance available for over 12 months

Question 15

Micro finance

Answer 15

A financial service aimed at entrepreneurs of small businesses

Question 16

Overdrafts

Answer 16

Allows a business to spend in excess of the amount in their bank account , up to a pre-arranged limit .

Question 17

Personal funds

Answer 17

Source of initial finance ; referring to the use of an entrepreneur’s own savings

Question 18

Retained profit

Answer 18

The value of the surplus That a business keeps to use after paying all its required costs

Question 19

Sale of assets

Answer 19

Selling existing items of value that a business owns , such as dormat assets and absolute assets ( outdated )

Question 20

Share capital

Answer 20

The money raised from selling shares in a limited liability company

Question 21

Share issue

Answer 21

An already existing publicly held company raises further finance by selling more of its shares

Question 22

Short term sources of finance

Answer 22

Finances available for less than 1 year

Question 23

Stock exchange

Answer 23

A highly regulated market place where individuals and businesses can buy or sell shares in publicly traded companies

Question 24

Trade credit

Answer 24

Allows a business to postpone payments, but now pay later

Question 25

Average costs

Answer 25

Average cost per unit of output

Question 26

Average revenue

Answer 26

Refers to the value of sales received from customers per unit of good

Question 27

Cost

Answer 27

The sum of money a business pays during the production process

Question 28

Direct costs

Answer 28

Costa specifically attributed to the production of a specific project or service

Question 29

Fixed costs

Answer 29

Costa which do not change depending on output

Question 30

Indirect costs / overheads

Answer 30

Costs which do not directly relate to the production or sale of a specific product

Question 31

Price

Answer 31

Refers to the amount of money a product is sold for

Question 32

Profit

Answer 32

Positive difference between a businesses revenue and total costs

Question 33

Revenue

Answer 33

The amount of money a business earns from the sale of goods and services

Question 34

Revenue stream

Answer 34

Refers to the money coming into a business from various business activities

Question 35

Running costs

Answer 35

Ongoing costs of operating a business

Question 36

Set up costs

Answer 36

The items of expenditure needed to start a business

Question 37

Total costs

Answer 37

The sum of all variable costs and all fixed costs of production

Question 38

Total revenue

Answer 38

All the money coming into a business usually from sales of good

Question 39

Variable costs

Answer 39

Costs that change with output

Question 40

Total costs Formula

Answer 40

Total fixed costs + total variable costs

Question 41

Total variable costs Formula

Answer 41

Average variable costs x quantity

Question 42

Total fixed costs Formula

Answer 42

Average fixed costs x quantity

Question 43

Average variable costs Formula

Answer 43

Total costs \ quantity

Question 44

Sales revenue Formula

Answer 44

Price x quantity sold

Question 45

Gross profit margin formula

Answer 45

(Gross profit / sales revenue ) x 100

Question 46

Profit Margin

Answer 46

( profit before Interest and tax / sales revenue ) x 100

Question 47

Return on capital employed ratio

Answer 47

( profit before interest and tax / capital employed ) x100

Question 48

Capital employed ratio

Answer 48

No current liabilities + equity

Question 49

Current ratio

Answer 49

Current assets / current liabilities

Question 50

Acid test ratio

Answer 50

(Current assets -stock ) / current liabilities

Question 51

Profit ratio

Answer 51

Total revenue -total costs

Question 52

Gross profit formula

Answer 52

Sales revenue -cost of goods

Question 53

Cost of goods sold formula

Answer 53

(Opening stalk + purchases) - closing stalk

Question 54

Net profit formula

Answer 54

Gross profit -expenses

Question 55

Net assets formula

Answer 55

Total assets -total liabilities

Question 56

Total equity

Answer 56

Total assets -total liabilities = net assets = total equity