Understanding Business Finance Concepts

Why do businesses need finance?

• To pay taxes

• To start up, expand, and manage daily operations

• To close down operations

• To hire new employees

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

• Short-term is more than a year, long-term is less than a year

• Short-term is less than a year, long-term is more than a year

• Both are more than a year

• Both are less than a year

What does capital expenditure refer to?

• Money spent on daily expenses

• Money spent on fixed assets for long-term benefits

• Money spent on employee salaries

• Money spent on marketing

Which of the following is an internal source of finance?

• Government grants

• Crowdfunding

• Bank loans

• Retained profits

What is a disadvantage of selling existing assets?

• Requires paying interest

• Takes time to sell at a reasonable price

• Increases debt

• Involves legal issues

What is a benefit of selling shares as an external source of finance?

• No need to repay capital

• Immediate cash flow

• Guaranteed profits

• No loss of control

What is debt factoring?

• Receiving government grants

• Selling unpaid invoices to receive money quickly

• Borrowing money from banks

• Selling shares to investors

What is microfinance?

• Small loans and financial services for those without access to traditional banking

• Government grants for small businesses

• Crowdfunding for large projects

• Large loans from banks

What is crowdfunding?

• Obtaining a government grant

• Raising small amounts of money from a large number of people

• Receiving a large loan from a single investor

• Selling company shares to the public

Which factor is NOT considered when making financial choices?

• Time and amount needed

• Legal form of the business

• Purpose of the finance

• Weather conditions