Business Finance Quiz 2

Which of the following is NOT an external source of business finance?

• Hire purchase

• Peer-to-peer lending

• Leasing

• Retained profit

How would an increase in the cost of raw materials affect a break-even chart?

• The TR line would flatten

• The MOS would increase

• The FC line would shift downwards

• The TC line would steepen

A definition of a prepayment is an expense which is:

• Paid but not yet due

• Due but not yet paid

• Paid and overdue

• Unpaid and overdue

A formula for the calculation of Net Assets is:

• Current Assets – Current Liabilities

• Net Current Assets + Capital Employed

• Non-Current Assets + Net Current Assets – Non-Current Liabilities

• Current Liabilities + Non-Current Liabilities + Capital Employed

Which of the following is the best definition for retained profit?

• Profit the business expects to make in the future

• The part of profit which has been paid to the Inland Revenue

• Profit distributed to owners or shareholders

• Profit after tax which has been left in the business for re-investment

Which of the following is a drawback of debt factoring as source of business finance?

• It speeds up the flow of cash into the business from debts

• The factor company takes on the risk of bad debt

• Only receive a percentage of the amount owed

• It slows down the flow of cash into the business

If the inventory turnover ratio increases from 15 days to 20 days, this means:

• Stock is being sold more often

• Stock is being sold more slowly

• More stock is being sold

• Less stock is being sold

The profit area on a break-even graph is:

• Above the break-even point

• Below the break-even point

• To the left of the break-even point

• To the right of the break-even point

When calculating the reducing balance method of depreciation:

• The non-current asset loses less value in the early years of its life

• The non-current asset loses more value in the early years of its life

• The non-current asset loses the same value throughout each year of its life

• The non-current asset loses value in line with inflation

A key benefit of a loan as a source of business finance is:

• It allows a business easy access to large sums of money

• It is interest free if the business is profitable

• It can be paid back flexibly over the loan term

• It comes with incentives such as free travel insurance