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WorksheetsCAM UNIT 5 AS (part 1)
Total questions: 50
Worksheet time: 3hrs 30mins
Name
Class
Date
1.
What is start-up capital?
a)
The money needed to expand a business
b)
The money required to begin operating a business
c)
The profit earned by a business
d)
The revenue generated by a business
2.
Which of the following is a reason a business might need finance for growth?
a)
To pay wages
b)
To purchase additional premises or equipment
c)
To cover daily operating costs
d)
To pay utility bills
3.
What is overtrading?
a)
Expanding too quickly or experiencing a downturn in sales
b)
Making excessive profits
c)
Paying off all debts
d)
Reducing production costs
4.
Which of the following is a short-term need for finance?
a)
Purchasing new machinery
b)
Paying wages or utility bills
c)
Developing a new product
d)
Expanding into new markets
5.
What is the main difference between short-term and long-term finance?
a)
Short-term finance is repayable within 12 months
b)
Long-term finance is repayable within 12 months
c)
Short-term finance is used for capital expenditure
d)
Long-term finance is used for daily operating costs
6.
Which of the following is an example of a long-term need for finance?
a)
Paying wages
b)
Purchasing raw materials
c)
Developing a new product
d)
Paying utility bills
7.
What is the primary purpose of start-up capital?
a)
To pay dividends to shareholders
b)
To cover initial costs such as premises and equipment
c)
To generate profit
d)
To reduce production costs
8.
Which of the following is a reason a business might need finance for survival?
a)
To expand into new markets
b)
To avoid bankruptcy due to overtrading
c)
To purchase new machinery
d)
To increase shareholder dividends
9.
What is the main difference between cash and profit?
a)
Cash is the surplus after costs, while profit is daily money flow
b)
Cash is daily money flow, while profit is the surplus after costs
c)
Cash is used for long-term projects, while profit is for short-term
d)
Cash is recorded in the balance sheet, while profit is in the income statement
10.
Which of the following is a consequence of running out of cash?
a)
Increased profits
b)
Business failure due to inability to pay expenses
c)
Higher shareholder dividends
d)
Increased market share
11.
What is working capital?
a)
The excess of current assets over current liabilities
b)
The total revenue generated by a business
c)
The profit earned by a business
d)
The total cost of production
12.
Which of the following is a current asset?
a)
Trade payables
b)
Inventory
c)
Long-term loans
d)
Mortgage
13.
What is the formula for working capital?
a)
Current assets ÷ Current liabilities
b)
Current assets - Current liabilities
c)
Current liabilities - Current assets
d)
Current assets × Current liabilities
14.
What does positive working capital indicate?
a)
Current liabilities exceed current assets
b)
Current assets exceed current liabilities
c)
The business is insolvent
d)
The business has no cash flow
15.
What is a disadvantage of having too much working capital?
a)
Increased liquidity
b)
Opportunity cost of money tied up in stock
c)
Difficulty paying short-term liabilities
d)
Higher risk of bankruptcy
16.
What is a consequence of negative working capital?
a)
Increased liquidity
b)
Difficulty paying short-term liabilities
c)
Higher profits
d)
Increased market share
17.
Which of the following is a current liability?
a)
Inventory
b)
Trade receivables
c)
Trade payables
d)
Cash
18.
What is the working capital cycle?
a)
The time between purchasing stock and receiving payment from customers
b)
The time between paying suppliers and receiving raw materials
c)
The time between selling products and paying wages
d)
The time between borrowing money and repaying loans
19.
How can a business improve its working capital cycle?
a)
By delaying payments to suppliers
b)
By speeding up production and reducing inventory holding time
c)
By increasing long-term loans
d)
By reducing sales
20.
What is the main risk of having too little working capital?
a)
Increased liquidity
b)
Difficulty paying short-term liabilities
c)
Higher profits
d)
Increased market share
21.
What is revenue expenditure?
a)
Spending on non-current assets
b)
Spending on everyday running costs
c)
Spending on long-term projects
d)
Spending on shareholder dividends
22.
Which of the following is an example of revenue expenditure?
a)
Purchasing a new building
b)
Paying wages to employees
c)
Buying new machinery
d)
Acquiring another business
23.
What is capital expenditure?
a)
Spending on daily operating costs
b)
Spending on non-current assets
c)
Spending on raw materials
d)
Spending on utility bills
24.
Which of the following is an example of capital expenditure?
a)
Paying wages
b)
Purchasing raw materials
c)
Buying new machinery
d)
Paying utility bills
25.
How is revenue expenditure recorded in financial statements?
a)
As an asset in the balance sheet
b)
As an expense in the income statement
c)
As a liability in the balance sheet
d)
As equity in the balance sheet
26.
How is capital expenditure recorded in financial statements?
a)
As an expense in the income statement
b)
As an asset in the balance sheet
c)
As a liability in the balance sheet
d)
As equity in the balance sheet
27.
What is the main difference between revenue and capital expenditure?
a)
Revenue expenditure is for long-term assets, while capital is for short-term
b)
Revenue expenditure is for short-term costs, while capital is for long-term assets
c)
Revenue expenditure is recorded in the balance sheet, while capital is in the income statement
d)
Revenue expenditure is for non-current assets, while capital is for current assets
28.
Which of the following is a consequence of high capital expenditure?
a)
Increased daily operating costs
b)
Higher long-term assets and potential growth
c)
Reduced profits
d)
Increased short-term liabilities
29.
What is the main purpose of revenue expenditure?
a)
To purchase long-term assets
b)
To cover daily operating costs
c)
To expand into new markets
d)
To pay shareholder dividends
30.
Which of the following is a consequence of high revenue expenditure?
a)
Increased long-term assets
b)
Higher daily operating costs
c)
Reduced short-term liabilities
d)
Increased market share
31.
What is bankruptcy?
a)
The dissolution of a limited company
b)
A court judgment that an individual or business cannot pay debts
c)
The process of selling assets to pay liabilities
d)
The protection of a business from creditors
32.
What is liquidation?
a)
The protection of a business from creditors
b)
The dissolution of a limited company and sale of assets
c)
A court judgment that an individual cannot pay debts
d)
The process of renegotiating debts
33.
What is administration?
a)
The dissolution of a limited company
b)
A court judgment that an individual cannot pay debts
c)
The protection of a business from creditors for a period
d)
The process of selling assets to pay liabilities
34.
Which of the following is a cause of business failure?
a)
High profits
b)
Lack of working capital
c)
Increased market share
d)
High liquidity
35.
What is the main risk of negative working capital?
a)
Increased liquidity
b)
Difficulty paying short-term liabilities
c)
Higher profits
d)
Increased market share
36.
Which of the following is a way to avoid business failure?
a)
Increasing long-term loans
b)
Maintaining positive working capital
c)
Reducing sales
d)
Decreasing production
37.
What is the main purpose of administration?
a)
To dissolve the company
b)
To protect the business from creditors for a period
c)
To sell assets to pay liabilities
d)
To increase profits
38.
Which of the following is a consequence of liquidation?
a)
The business continues to operate
b)
Assets are sold to pay liabilities
c)
The business is protected from creditors
d)
The business renegotiates its debts
39.
What is the main difference between bankruptcy and liquidation?
a)
Bankruptcy applies to individuals, while liquidation applies to companies
b)
Bankruptcy applies to companies, while liquidation applies to individuals
c)
Bankruptcy involves selling assets, while liquidation involves renegotiating debts
d)
Bankruptcy protects the business, while liquidation dissolves it
40.
Which of the following is a way to improve liquidity?
a)
Increasing long-term loans
b)
Reducing current assets
c)
Increasing working capital
d)
Decreasing sales
41.
What are trade receivables?
a)
Amounts a business needs to pay to suppliers
b)
Amounts a business is yet to receive from customers
c)
Long-term loans
d)
Short-term liabilities
42.
What are trade payables?
a)
Amounts a business needs to pay to suppliers
b)
Amounts a business is yet to receive from customers
c)
Long-term loans
d)
Short-term liabilities
43.
How can a business improve its cash flow by managing trade receivables?
a)
By delaying payments to suppliers
b)
By asking customers to pay more quickly
c)
By increasing long-term loans
d)
By reducing sales
44.
What is the main risk of delaying trade payables?
a)
Improved cash flow
b)
Upsetting suppliers
c)
Increased liquidity
d)
Higher profits
45.
What is the main risk of asking customers to pay more quickly?
a)
Improved cash flow
b)
Upsetting customers
c)
Increased liquidity
d)
Higher profits
46.
Which of the following is a way to manage trade payables effectively?
a)
Delaying payments to suppliers
b)
Increasing long-term loans
c)
Reducing sales
d)
Increasing working capital
47.
What is the main purpose of managing trade receivables and payables?
a)
To increase long-term loans
b)
To improve cash flow and working capital
c)
To reduce sales
d)
To increase market share
48.
Which of the following is a consequence of poor management of trade receivables?
a)
Improved cash flow
b)
Difficulty collecting payments from customers
c)
Increased liquidity
d)
Higher profits
49.
What is the main benefit of managing trade payables effectively?
a)
Improved relationships with suppliers
b)
Increased long-term loans
c)
Reduced sales
d)
Higher market share
50.
Which of the following is a way to reduce the working capital cycle?
a)
Increasing inventory holding time
b)
Delaying payments to suppliers
c)
Speeding up production and reducing inventory holding time
d)
Reducing sales
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