Finance

Question 1

whats start up capital?

Answer 1

capital needed by an entrepreneur when starting a business

Question 2

working capital

Answer 2

capital needed to finance day to dy expenses and pay short term debt

Question 3

Non current/ fixed assets

Answer 3

resources owned by a business which will be used for a period longer than a year, like building and machinery

Question 4

capital expenditure

Answer 4

spending by a business on non current assets

Question 5

long term finance

Answer 5

debt used to finance the purchase of non current assets or expansion, borrowing not expected to be returned less than 5 years

Question 6

short term finance

Answer 6

loands or debt business expects to pay back within a year

Question 7

retained profit

Answer 7

profit remaining after all expenses have been paid, and is reinvested back into business

Question 8

overdraft

Answer 8

agreement with bank which allows a business to spend more money than it has in account, loan has to be repaid within a year

Question 9

trade receivables

Answer 9

amount owed to a business by customers who bought goods on credit

Question 10

debt factoring

Answer 10

selling trade receivables to improve business liquidity

Question 11

bank loan

Answer 11

provision if finance by a bank which business. will repay with interest over a period of time

Question 12

leasing

Answer 12

obtaining the use of non current asset by paying a fixed amount for a period pf time

Question 13

mortgage

Answer 13

long term loan used to purchase land or buildings

Question 14

debenture

Answer 14

a bond issued by a company to raise long term finance usually at a fixed rate pf interest

Question 15

equity finance

Answer 15

permanent finance provided by owners in a limited company

Question 16

micro finance

Answer 16

small amounts of capital loaned to entrepreneur in countries where business finance is difficult to obtain

Question 17

crowd funding

Answer 17

financing a business idea by obtaining small amounts of capital from a large amount of people

Question 18

why business needs finance

Answer 18

1. start up capital
   2/ invest in latest technology and machinery
2. finance espansion
3. pay day to day expenses
4. Markey research

Question 19

what are the internal sources of finance

Answer 19

1. retained profit
2. sales of non current assets
   3 reduce inventory
3. cash balance
4. reduce trade recievables

Question 20

what are other sources of finance

Answer 20

1. micro finance
2. crowd funding

Question 21

why’s cash important to business

Answer 21

without cash, business will not be able to pay day to day expenses and business will be forced into liquidation

Question 22

whats cash flow forecast

Answer 22

estimate of future cash inflows and outflows in business, if inflows more than outflow=positive chasflow, otherwise negative cashflow

Question 23

sources of inflow

Answer 23

1. sales. of products
2. payment by debtors
3. borrowing money
4. sales of assets
5. investors like shareholders putting in money

Question 24

sources of Chas outflows

Answer 24

1.purchscing materials
2. paying wages
3. repaying loans
4. purchasing fixed assets

Question 25

importance of chaflow forecast

Answer 25

1. tells manager how much cash available. to pay debt 2. how much business needs to borrow to prevent insolvency 3. tells whether business is holding too much cash which can be reinvested

Question 26

uses of cashflow forecast

Answer 26

1. starting up business 2. keep bank informed 3.manage nbu8siness

Question 27

whats liquidity

Answer 27

ability of business. to pay. short term debt

Question 28

what does length of working capital cycle depend on

Answer 28

1. level of invenotries 2. how quick. business. finds buyers 3. how long it takes to sell products

Question 29

how to improve working capital

Answer 29

1. reduce ˆnvintory level 2. negotiate longer credit terms with supplier 3.reduce trade receivables

Question 30

whats credit sales

Answer 30

goods sold to customers who will pay for these at an agreed date

Question 31

whats profit

Answer 31

difference between revenue and total cost

Question 32

what are the types of profit

Answer 32

1. gross profit 2. profit 3. retained profit

Question 33

revenue

Answer 33

price times quantity sold

Question 34

total costs

Answer 34

cost of sales plus expenses

Question 35

gross profit

Answer 35

difference between revenue and cost of sales

Question 36

importance of profit to business

Answer 36

1. reward for business owners for their risk 2. measure success of business 3. decide whether or not continue make product 4. purchase fixed assets and expand 5. helps attract investors

Question 37

difference between cash and profit

Answer 37

1. many business that makes profit but don't last since they can't manage cash 2.money invested in business or borrowed will increase cash but not profit 3. capital expenditure decreases cash but not profit 4. selling goods on cash will increase profit but not cash

Question 38

whats an income statement

Answer 38

financial record of revenue, costs and profit of a business

Question 39

importance of profit TO STAAKEHOLDERS

Answer 39

1. shareholders need it to distribute it as dividends 2. employees job security 3. lenders make sure profit is enough to repay debt 4. government give high taxes 5. suppliers 6. managers compare to competitors

Question 40

statement of financial position

Answer 40

accounting statement that records assets, liabilities and owners equity, shows FINANCIAL HEALTH OF BUSINESS

Question 41

assets

Answer 41

resources owned b y business

Question 42

liabilities

Answer 42

debt of business that will be payed in future

Question 43

non current assets

Answer 43

resources that business owns and expects to use for a long period of time like machinery

Question 44

current assets

Answer 44

resources business owns that expects to convert into cash

Question 45

trade receivables

Answer 45

amount of money owed to business when customers pay on credit

Question 46

current liabilities

Answer 46

debt business expects to repay

Question 47

trade payables

Answer 47

debt business has to pay to supplier for goods bought on credit

Question 48

owners equity

Answer 48

amount owed by business to its owners

Question 49

why's it important to check business performance

Answer 49

1.identify strength and weakness 2. show wether business is. meaning objectives 3. improve future performance

Question 50

gross profit margin(ratio between profit and revenue)

Answer 50

gross profit/revenue X100

Question 51

net profin margin

Answer 51

pofit/revenue X100

Question 52

Profit

Answer 52

revenue- expenses+sales

Question 53

return on capital employed

Answer 53

profit/ capital employees X100