Capital and net current assets- page 28

Question 1

Capital

Answer 1

The amount of money put into an enterprise by the owner to start up the business so it can begin trading

Question 2

Net current assets

Answer 2

This is the working capital of the business once it is established

Question 3

Types of capital

Answer 3

• Business loan
• Retained profit
• Money invested in the enterprise by the owner (owners capital)

Question 4

Business loan

Answer 4

This is when an enterprise may require additional capital

Question 5

Retained profit

Answer 5

Can later be used as capital to grow the business

Question 6

Owners capital

Answer 6

The money used to purchase assets

Question 7

Importance of net current assets

Answer 7

Current assets must always be greater than current liabilities

Question 8

What does it mean when net current assets are positive?

Answer 8

If the net current assets total is positive, the enterprise has money to pay its short-term debts

Question 9

What does it mean when net current assets are negative?

Answer 9

If the net current assets total is negative, the enterprise does not have the money to pay its current liabilities. This could result in financial difficulties