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Question 1

Functions of a commercial Bank

Answer 1

The primary functions of a commercial bank are accepting deposits and also lending funds to individuals and organizations

Question 2

Function of central banks

Answer 2

Central banks are national banks that provide financial and banking services for its country’s government and commercial banking system

Question 3

Types of bank accounts

Answer 3

Savings account, checking account, salary account, current account.

Question 4

Types of non-financial institutions

Answer 4

Examples of nonfinancial institutions include insurance firms, venture capitalists, currency exchanges and some microloan organizations

Question 5

Definition of collateral

Answer 5

Collateral is an item of value pledged to secure a loan

Question 6

Importance of collateral

Answer 6

Reducing losses: Collateral plays a function as compensation for a lender’s losses in the event that a borrower defaults on a loan.

Question 7

Types of collateral

Answer 7

Real Estate Collateral.
Business Equipment Collateral. Inventory Collateral. Invoices Collateral. Cash Collateral. Investments Collateral.

Question 8

Secured versus unsecured loan

Answer 8

With a secured loan, you give the lender the right to seize the asset you use as collateral should you fail to repay the loan. With an unsecured loan, no assets are required

Question 9

What is budgeting

Answer 9

budget is a plan you write down to decide how you will spend your money each month

Question 10

Personal budget

Answer 10

Personal budgets are budgets that everyday people make to manage their income and expenses,

Question 11

Government budget

Answer 11

A government budget is a document prepared by the government and/or other political entity presenting its anticipated tax revenues and proposed spending/expenditure for the coming financial year.

Question 12

Short term financing definition

Answer 12

Short-term financing means taking out a loan to make a purchase, usually with a loan term of less than one year

Question 13

Types of short term financing

Answer 13

The main sources of short-term financing are (1) trade credit, (2) commercial bank loans, (3) commercial paper, a specific type of promissory note, and (4) secured loans.

Question 14

Long term financing definition

Answer 14

Long-term finance can be defined as any financial instrument with maturity exceeding one year

Question 15

Types of long term financing

Answer 15

bank loans, bonds, leasing and other forms of debt finance

Question 16

Capital definition

Answer 16

the sum of financial assets that are required to produce goods or services

Question 16

Importance of capital

Answer 16

Capital helps a company grow by providing the assets it needs to generate more revenue.

Question 17

Types of capital

Answer 17

working capital, debt, equity, and trading capital

Question 18

Working capital

Answer 18

the capital of a business which is used in its day-to-day trading operations,

Question 19

Debt

Answer 19

When a company borrows money to be paid back at a future date

Question 20

Equity

Answer 20

Equity is the amount of capital invested or owned by the owner of a company.

Question 21

Trading capital

Answer 21

the amount of money allotted to an individual or a firm to buy and sell various securities.

Question 22

Purpose of financial records

Answer 22

to provide information about the results of operations, financial position, and cash flows of an organization

Question 23

Gross profit

Answer 23

Gross profit, also known as gross income, equals a company’s revenues minus its cost of goods sold

Question 24

Net profit

Answer 24

Net profit is the result after all expenses have been subtracted from revenues

Question 25

balance sheet definition

Answer 25

balance sheet is a financial statement that contains details of a company’s assets or liabilities at a specific point in time.