G11 AS Level Business: 29 - Business Finance

What is the primary purpose of start-up capital?

• To buy resources, machinery & equipment needed for business activity

• To pay employee wages needed for business activity

• To cover legal expenses

• To pay dividends

Answer explanation

Start-up capital is used to set up the business, including equipment and assets.

What is working capital used for?

• Long-term expansion
• Buying machinery
• Day-to-day expenses
• Paying long-term loans

Answer explanation

Working capital covers daily costs like wages, rent, and inventory.

What is the formula for working capital?

• CL - CA
• CA - CL
• FA - CL
• FA - LTD

Answer explanation

Working capital = current assets minus current liabilities.

Which is an internal source of finance?

• Retained profit
• Bank loan
• Trade credit
• Debentures

Answer explanation

Internal finance comes from within the business.

A business sells an unused warehouse. What source is this?

• Trade credit
• Sale of assets
• Leasing
• Overdraft

Answer explanation

Selling assets releases internal finance quickly.

A business delays payments to suppliers. What is this?

• Trade credit
• Hire purchase
• Debt factoring
• Equity finance

Answer explanation

Trade credit allows delayed payment to suppliers.

Selling invoices to get immediate cash is called?

• Overdraft
• Leasing
• Debt factoring
• Trade credit

Answer explanation

Debt factoring improves liquidity but reduces total value received.

Renting equipment instead of buying it is?

• Hire purchase
• Leasing
• Debt factoring
• Equity finance

Answer explanation

Leasing spreads cost and avoids large upfront payment.

Paying for equipment in instalments and owning it later is?

• Leasing
• Hire purchase
• Trade credit
• Loan

Answer explanation

Hire purchase leads to ownership after final payment.

Issuing shares is what type of finance?

• Debt
• Equity
• Trade credit
• Overdraft

Answer explanation

Equity finance involves selling ownership shares.