B207B-Assestment 1

What is a bank overdraft and how does it work?

• A bank overdraft is a type of loan that must be repaid immediately.

• A bank overdraft allows account holders to earn interest on their balance.

• A bank overdraft is a fee charged for maintaining a low account balance.

• A bank overdraft is a facility that allows an account holder to withdraw more money than is available in their account, up to a predetermined limit.

What are the advantages of leasing equipment for a small business?

• Higher initial costs

• Advantages of leasing equipment for a small business include improved cash flow, access to modern technology, reduced maintenance costs, and flexibility in upgrading equipment.

• Limited access to new technology

• Increased maintenance responsibilities

What are some common methods for managing working capital?

• Reducing employee salaries

• Increasing product prices

• Cutting marketing expenses

• Optimizing inventory, improving receivables, extending payables, and maintaining cash reserves.

How can retained earnings be reinvested into a business?

• Distributing retained earnings as dividends to shareholders

• Investing in stocks of other companies

• Using retained earnings to pay off debts

• Retained earnings can be reinvested into a business by funding new projects, purchasing equipment, or expanding operations.

What are the benefits of using leasing as a financing option?

• Benefits of leasing include lower upfront costs, flexibility, improved cash flow, potential tax advantages, and access to the latest equipment.

• Higher maintenance costs

• Inflexibility in payment terms

• Limited access to equipment upgrades