N5 Management of Finance

How are sole traders financed?

• The partners

• Selling shares to family and friends

• Owners savings

Which of the following are disadvantages of government grants?

• Item is not owned until all payments are made

• If interest rates change, repayments might increase

• Usually has conditions attached

• Can take time to get

Answer explanation

A government grant does not need to be paid back.

Which of the following is a method of finance secured against land or property?

• Mortgage

• Bank overdraft

• Grant

• Hire purchase

Which of the following relates to partnerships sourcing finance by increasing number of partners?

• Brings more skills and ideas to the business

• Profits would need to be shared amongst more people

• Large amounts of finance can be raised that doesn't need to be paid back

• Risk of increased disagreements occuring

Which of the following is a short term source of finance with a high rate of interest?

• Bank loan

• Bank overdraft

• Hire purchase

• Mortgage

Which method of finance involves buying an item and paying for it at a later date over a period of time?

• Bank overdraft

• Grant

• Hire purchase

• Share issue

Which method of finance is only available to private/public limited companies?

• Grant

• Bank loan

• Hire purchase

• Share issue

Arguments over borrowed money may occur with this source of finance

• Hire purchase

• Bank overdraft

• Government grants

• Loan from family/friends

To be able to make a profit which calculation should be carried out?

• Expenses-sales

• Sales-expenses

• Total costs = Total revenue

• Sales/Expenses

Answer explanation

Profit = sales-expenses

To be able to make a profit, the money made from selling products has to be more than the money paid out in expenses (costs)

The break-even point is to find out how many units of a product you have to sell before you start to make a profit?

• False

• True

Answer explanation

The break-even point is when Total costs=Total revenue