Business Finance Review

Working capital is calculated by subtracting _________ from current assets.

What is the primary reason why businesses need capital?

• To increase market competition

• For survival and growth

• To reduce working capital

• To avoid technological advancement

• Which of the following is an example of capital expenditure?

• Payment of utility bills

• Purchase of new machinery

• Payment of salaries

• Purchase of office supplies

• Which of the following situations might indicate a business's need for short-term finance?

• • Planning to expand operations

• • Acquiring new machinery for long-term use

• • Covering seasonal fluctuations in demand

• • Repaying a long-term loan

• What is the formula to calculate working capital?

• • Total assets minus total liabilities

• • Current assets minus current liabilities

• • Total revenue minus total expenses

• • Profit margin divided by total assets

Trade receivables refer to the amount of money owed to a business by its _________.

Capital expenditure is incurred for the acquisition of _________ assets.

• Capital expenditure is recorded on the balance statement.

• TRUE

• FALSE

• Which of the following is considered a long-term source of finance?

• • Bank overdraft

• • Trade credit

• • Retained earnings

• • Short-term loans

• Working capital is essential for covering day-to-day expenses.

• TRUE

• FALSE