29.1 The need for business finance

Question 1

Start-up capital

Answer 1

The capital needed by an entrepreneur to start up a business.

Question 2

Working capital

Answer 2

The capital needed to pay for raw materials, day-to-day running costs, and credit offered to customers.

Question 3

Short term finance

Answer 3

Money required for short periods of time of up to one year.

Question 4

Long-term finance

Answer 4

Money required for more than one year

Question 5

Profit

Answer 5

The value of goods sold (revenue) for fewer costs.

Question 6

Liquidity

Answer 6

The ability of a business to pay its short-term debts.

Question 7

Administration

Answer 7

When administrators manage a business that is unable to pay its debts with the intention of selling it as a going concern.

Question 8

Bankruptcy

Answer 8

The legal procedure for liquidating a business (or property owned by a sole trader) which cannot fully pay its debts out of its current assets.

Question 9

Liquidation

Answer 9

When a business ceases trading and its assets are sold for cash to pay suppliers and other creditors.