Finance Unit Quiz

What is the primary role of the finance function in a business?

• Managing employee relations

• Ensuring the business has enough money to survive

• Overseeing marketing strategies

• Handling customer service

Which of the following is an internal source of finance?

• Issuing bonds

• Bank loan

• Retained earnings

• Selling shares

What is a key disadvantage of debt finance?

• No need to repay

• Ownership dilution

• Gaining expertise

• Repayments with interest

What does equity finance involve?

• Taking out a mortgage

• Using retained earnings

• Selling shares in the business

• Borrowing money from a bank

Why is cash flow different from profit?

• Cash flow includes only revenue

• A business can be profitable but still run out of cash

• Cash flow is calculated annually

• Profit includes only expenses

What is the purpose of a cash flow forecast?

• To determine fixed costs

• To predict when money will come in and go out

• To calculate total revenue

• To set selling prices

Which of the following is a fixed cost?

• Utility bills

• Rent

• Staff wages

• Raw materials

At what point does a business break even?

• When sales revenue equals total costs

• When variable costs are covered

• When total revenue exceeds total costs

• When total costs are higher than sales revenue

How is the average rate of return calculated?

• Total revenue divided by total costs

• Average annual profit divided by the initial investment

• Total profit divided by the number of years

• Total profit divided by total costs

What does the income statement show?

• The cash flow of a business

• The net worth of a business

• The profit or loss over a specific period

• The total assets and liabilities