Finance and Expenditure Quiz

Which of the following BEST describes capital expenditure?

• Finance spent on wages and salaries of employees.

• Spending on non-current assets that will be used for at least the next 12 months.

• Finance used for the routine running of a business.

• Payments made to settle short-term liabilities.

Revenue expenditure is recorded on the:

• Statement of financial position.

• Statement of cash flows.

• Statement of profit or loss.

• Equity account.

Which of the following is NOT an example of capital expenditure?

• Purchase of machinery.

• Buying raw materials for production.

• Acquisition of a delivery truck.

• Investment in office computers.

Why must businesses carefully manage their revenue expenditure?

• To avoid diluting ownership and control of the business.

• To prevent short-term liquidity problems and maintain profitability.

• To ensure that the value of their shares increases in the stock market.

• To improve the value of non-current assets.

Which of the following is considered an internal source of finance?

• Bank loans.

• Retained profits.

• Trade credit.

• Crowdfunding.

What is a disadvantage of using retained profits as a source of finance?

• It requires payment of high-interest rates.

• It may result in dilution of ownership.

• It limits funds available for shareholder dividends.

• It incurs significant short-term liabilities.

Which of these is an external source of finance specifically suitable for long-term funding?

• Overdrafts.

• Trade credit.

• Share capital.

• Credit cards.

Why might a business opt to use trade credit instead of a loan?

• To avoid interest charges.

• To secure ownership of non-current assets.

• To obtain immediate access to significant funds.

• To improve cash flow over the long term.

Which type of external finance involves raising small amounts of money from many people, often using online platforms?

• Loan capital.

• Crowdfunding.

• Debentures.

• Trade credit.

A supermarket sells its old delivery vehicles to fund the purchase of new ones. This is an example of:

• Crowdfunding.

• Retained profit.

• Sale of assets.

• Loan capital.