3.1 Introduction to FInance

Question 1

why do businesses need finance (terms)?

Answer 1

replace equipment, everyday bills, research and development, starting up, expansion, unforeseen events

Question 2

why do businesses need finance when they’re starting up?

Answer 2

because it requires a start up capital in order to purchase equipment and premises

Question 3

why do business need finance for the day to day?

Answer 3

because they need to finance their working capital (money needed to run their business daily)

Question 4

how can expansion be a need for finance?

Answer 4

because if you buy another company you need the money in order to do that

Question 5

how can expansion be achieved?

Answer 5

buy buying or taking over another business

Question 6

decline sales could lead to….

Answer 6

cash needs to keep the business table

Question 6

why is finance needed in research and development?

Answer 6

to make new products or invest in new marketing strategies

Question 7

what is finance?

Answer 7

finance refers to the various available money that an organization has to fund its business activities

Question 8

how can the purpose of finance be charaterized as ?

Answer 8

capital expenditure or revenue expenditure

Question 8

what is the finance department responsible for?

Answer 8

overseeing its financial management

Question 8

what is capital expenditure (aka CapEx)?

Answer 8

money spent to acquire items (fixed assets) in a business that will last for more than a year and may be used over and over

Question 8

is capital expenditure long term?

Answer 8

,yes

Question 9

what is the intention of capital expenditure?

Answer 9

to assist business in their growth and success (they help business make money)

Question 10

examples of capital expenditure:

Answer 10

machinery, equipment, land, furniture, vehicles, computers, etc

Question 11

what is revenue expenditure?

Answer 11

money spent on the day to day running of a business

Question 12

examples of revenue expenditure?

Answer 12

payments of rent, wages, raw materials, insurance, and fuel

Question 13

for how long or when does revenue expenditure has to be paid?

Answer 13

they have to be paid immediately in order to keep the business functioning

Question 14

revenue expenditure is

Answer 14

short term, does not add to the value of a firms non current assets, daily regular expenditure, provides short term benefits, includes low cost expenditures (operation expenses)

Question 15

capital expenditure is

Answer 15

non-recurring (one off) expenditure, provides long term benefits, significant investments

Question 16

what is the role of finance?

Answer 16

finance is important in all stages of business development