Business Finance

What is the main use of short term finance?

• Shorten amount of time customers have to pay

• Buy capital/fund expansion

• Cash flow/meet day to day running costs

• Reduce stock held

What is the difference between cash and profit?

• Cash is the amount of money immediately available, while profit is the ability to pay for operations

• Cash is money on hand, while profit is the excess of revenues over expenses

• Cash is a financial gain, while profit is money immediately available

• Cash is the excess of revenues over expenses, while profit is money on hand

What is the importance of working capital for a business?

• It is more than just cash and is needed to pay short term debts

• It includes debtors and stock

• It allows businesses to pay for operations and to reinvest in their growth and development

• It provides an indication of the health of the business

What are the factors to consider when choosing a source of finance?

• The amount required, the size and type of business organisation, and the purpose and period of time required

• The amount required, control over the business, and the difference between cash and profit

• The amount required, the size and type of business organisation, and the difference between cash and profit

• The size and type of business organisation, control over the business, and the purpose and period of time required

What are the main costs involved in making and selling goods or services?

• Raw materials, labour costs, and marketing and distribution costs

• Labour costs, electricity and power, and interest charges

• Marketing and distribution costs, interest charges, and raw materials

• Electricity and power, raw materials, and labour costs

What is the main use of medium/long term finance?

• Cash flow/meet day to day running costs

• Buy capital/fund expansion

• Shorten amount of time customers have to pay

• Reduce stock held

What is the difference between loans and shares?

• Loans mean borrowing money from banks and other financial lenders

• Loans are high risk as more loans mean more debt interest must be paid even if the business doesn’t make any profit

• Shareholders will want a share of the profits at some point (dividend)

• Selling shares mean selling some of the ownership of a business

What is the ability of a firm to meet its short term debts known as?

• Running costs

• Capital expenditure

• Working capital

• Liquidity

What are the factors which affect the method of finance chosen?

• How long is the money needed for, what is the money needed for, and type and size of the business

• What risk is involved, how much is needed, and cost of finance

• What risk is involved, type and size of the business, and cost of finance

• How long is the money needed for, what is the money needed for, and how much is needed

What is the difference between short-term and long-term finance?

• Short term finance is for more than one year, while long term finance is for less than one year

• Short term finance is to buy capital/fund expansion, while long term finance is for cash flow/meet day to day running costs

• Short term finance is for less than one year, while long term finance is for more than one year

• Short term finance is to reduce stock held, while long term finance is to shorten amount of time customers have to pay