N5 Finance Quick Test Revision

Why is finance important to every organisation?

• Because it helps in creating a company logo

• Because all organisations have to deal with money and manage it efficiently

• Because it allows companies to have more employees

• Because it is required by law to have a finance department

What are some of the main tasks of the finance department?

• Hiring employees, marketing, and customer service

• Payment of wages and salaries, payment of accounts, and keeping financial records and accounts

• Creating business strategies, investment in stocks, and designing products

• Managing public relations, conducting interviews, and organising events

What is an internal source of finance?

• A loan from a bank

• Money retained from profits

• Investment from shareholders

• Credit from suppliers

What is a disadvantage of using an overdraft as a short-term source of finance?

• It can be agreed in advance

• It offers a permanent facility

• Interest rates can be quite high

• It improves cash flow

How does trade credit benefit a business?

• It requires immediate payment

• It allows customers more time to pay

• It gives time to sell goods before payment is due

• It involves high interest rates

What is an advantage of issuing shares as a long-term source of finance?

• Shareholders have to be paid dividends

• It is difficult to sell enough new shares

• Large amounts of money can be raised fairly easily

• The company retains full control without shareholders

What is one of the main advantages of bank loans and mortgages?

• The interest rates are negotiable.

• Repayments are made in regular fixed instalments, making budgeting easier.

• They do not have to be repaid.

• They provide advice on business matters.

What is a feature of government grants?

• They have to be repaid with interest.

• They are given without any paperwork.

• The money does not have to be repaid.

• They are provided by banks.

What is the formula for calculating profit ?

• Profit = Total Costs + Total Revenue

• Profit = Sales – Expenses

• Profit = Total Revenue / Total Costs

• Profit = Sales + Expenses

What are the three main types of costs ?

• Fixed Costs, Variable Costs, Total Costs

• Direct Costs, Indirect Costs, Operating Costs

• Administrative Costs, Operational Costs, Financial Costs

• Initial Costs, Recurring Costs, Marginal Costs