BUSINESS FINANCE

What is the main purpose of financial planning for business activities?

• To ensure the availability of funds for business activities

• To reduce the cost of production

• To increase the number of employees

• To expand the business to new locations

What is the difference between capital and revenue expenditure?

• Capital expenditure involves reducing the cost of production, while revenue expenditure involves increasing the number of employees

• Capital expenditure involves spending on all costs and assets other than fixed assets, while revenue expenditure involves the purchase of assets that are expected to last more than one year

• Capital expenditure involves the purchase of assets that are expected to last more than one year, while revenue expenditure involves spending on all costs and assets other than fixed assets

• Capital expenditure involves generating increasing sales, while revenue expenditure involves increasing revenue to impact on overall profit levels

What is the significance of working capital to a business?

• It helps in reducing the cost of production

• It ensures the availability of funds for business activities

• It helps in managing everyday expenses and prevents the business from becoming illiquid

• It is used for expanding the business to new locations

What are the different sources of long, medium, and short-term finance?

• Government grants only

• Both internal and external sources

• External sources only

• Internal sources only

What is the role played by the main financial institutions?

• To increase the liabilities or debts of the business

• To reduce the cost of financing for businesses

• To provide advice, contacts, and experience to small to medium-sized businesses

• To manage the day-to-day operations of the business

What is the meaning of working capital?

• The finance needed for everyday expenses

• The purchase of assets that are expected to last more than one year

• The ability of a firm to be able to pay its short-term debts

• The purchase of essential capital equipment for the business

What are the main short-term sources of finance?

• Bank overdrafts and venture capital

• Bank loans and creditors from suppliers

• Debt factoring and trade credit

• Micro-finance and grants from government agencies

What is the main advantage of bank overdraft as a source of finance?

• No interest has to be paid

• The business can benefit from the asset without purchasing it

• No need for collaterals or security

• More flexible and the overdraft amount can be adjusted every month according to needs

What is the main disadvantage of trade credit as a source of finance?

• May lead to shortage of stock and loss of sales

• Costs related to storage of stock is reduced

• The business may not have any old or obsolete assets

• The business may not get cash discounts

What is the main advantage of leasing as a source of finance?

• The maintenance of the asset is done by the leasing firm

• The business can overdraw their accounts to a greater value than the balance in the account

• The total cost of leasing may end up higher than the purchasing of asset

• The business can benefit from the asset without purchasing it