TOS SEIA traning finance 1

​SEIA Finance training 1

Definitions and concept

​REVENUE

money earned from selling goods



Revenue = Price x Number of Units Sold

Sources of finance

Definition

any source that the company generates - either from internal from within the business or externally

=>used for operations, growth for the company
DIFFERENT FROM REVENUE

​Sources of finance - Internal

• Personal funds - owner's capital

• Retained profit

• Selling Assets/properties for cash

​Sources of finance - External

• Selling shares

• Loans from banks

• Crowdfunding

• Angel investors

Multiple Choice

A company plans to expand its operations and considers the following funding options:

It sells unused machinery that it has owned for several years.

It uses the cash generated from this sale to help fund the expansion.

No borrowing or new investors are involved.

What source of finance is this?

• Internal

• External

• Both

Multiple Choice

A private company wants to fund a major expansion. Instead of using retained profit, it agrees to receive funds from an investor who is not currently an owner.
What source of finance is this?

• Internal

• External

COSTS

• Fixed costs: costs of production that will always have to be payed 

• Variable costs: costs of production that will change depending on level of output (economy/diseconomy of scale)

Total Cost = TFC+TVC

Average FC = TFC / Quantity; Average VC = TVC / quantity

Average Cost = Total cost / quantity = AFC+AVC

Multiple Choice

A retail company pays its sales staff a base monthly salary plus a commission for each unit sold. If sales drop to zero in a given month, employees still receive their base salary, but no commission is paid.

Identify the type(s) of cost for base salary and commission.

• Base salary: Variable cost; Commission: Fixed cost

• Base salary: Fixed cost; Commission: Variable cost

• Base salary: Fixed cost; Commission: Fixed cost

• Base salary: Variable cost; Commission: Variable cost

Business entities

Ltd - private limited company: limited liabilities for all shareholders
PLC - public limited company: can sell shares on stock market
Sole proprietor: unlimited liability
NGOs and social enterprises: objective lies in benefiting society

Stocks: shares for dividends of profit
IPO: when transforming from private to public

Multiple Choice

A business is owned by shareholders, has its shares traded on a stock exchange, and must publish its financial statements for public review.
what type of business is this?

• Sole proprietor

• PLC

• Ltd

• NGO

Multiple Choice

A business is owned by a small group of individuals, has limited liability, and does not sell shares to the general public.

What type of business is this?

• Sole proprietor

• PLC

• Ltd

• NGO

As production increase, cost or production per product increase

VDU: poor management, resource scarcity(out of resource, extinction)

Diseconomies of Scale

As production increase, cost or production per product decrease

VDU: bulk purchase, advancements in technology

Economies of scale

Returns to Scale

Multiple Choice

After signing with a manufacturers closer to an overseas markets, a company is able to lower its price

This is...

• Diseconomies of scale

• Economies of scale

Multiple Choice

Two mid-sized consulting firms merge to form a single large firm. After the merger, since the 2 former companies were similar, equipments and workforce were repeated, leading to unused equipments and inefficient labour utilization. This is...

• Diseconomies of scale

• Economies of scale