Finance

Question 1

Define “capital expenditure.”

Answer 1

Money spent by a business on acquiring or maintaining fixed assets like equipment or property.

Question 2

What is finance in business?

Answer 2

The management of money, including how businesses source, allocate, and control their funds.

Question 3

What is revenue expenditure?

Answer 3

Spending on day-to-day running costs of the business, like wages or utilities.

Question 4

What is working capital?

Answer 4

The funds a business has available for its day-to-day operations (current assets minus current liabilities).

Question 5

Define “cash flow.”

Answer 5

The movement of money into and out of a business over a period.

Question 6

What is a cash flow forecast?

Answer 6

A financial plan that estimates the cash inflows and outflows over a period.

Question 7

What is profit?

Answer 7

The difference between total revenue and total costs.

Question 8

Define “gross profit.”

Answer 8

Revenue minus the cost of goods sold (COGS).

Question 9

What is net profit?

Answer 9

Gross profit minus all other business expenses.

Question 10

What is retained profit?

Answer 10

Profit kept within the business for reinvestment, rather than being distributed to shareholders.

Question 11

Define “break-even point.”

Answer 11

The level of sales at which total revenue equals total costs, resulting in no profit or loss.

Question 12

What is the break-even formula?

Answer 12

Break-even = Fixed costs / (Selling price per unit – Variable cost per unit)

Question 13

What is the purpose of a balance sheet?

Answer 13

To show a business’s financial position at a specific point in time by detailing assets, liabilities, and equity.

Question 14

What are current assets?

Answer 14

Assets that are likely to be converted into cash within one year, like inventory or receivables.

Question 15

Define “liabilities.”

Answer 15

Debts or obligations that the business owes to others.

Question 16

What is equity?

Answer 16

The value of the owners’ stake in the business (assets minus liabilities).

Question 17

Define “income statement.”

Answer 17

A financial report showing a business’s revenue, costs, and profit over a period.

Question 18

What is a fixed cost?

Answer 18

Costs that do not change with the level of output, like rent or salaries.

Question 19

What is a variable cost?

Answer 19

Costs that vary directly with the level of production, such as raw materials.

Question 20

Define “loan capital.”

Answer 20

Money borrowed by a business to fund its activities, typically repaid with interest.

Question 21

What is “share capital”?

Answer 21

Funds raised by a business by issuing shares to investors.

Question 22

What is “debt factoring”?

Answer 22

A financial service where a business sells its accounts receivable to a third party for immediate cash.

Question 23

Define “leasing.”

Answer 23

Renting an asset instead of purchasing it outright, commonly used for equipment or vehicles

Question 24

What is “venture capital”?

Answer 24

Funds invested in a startup or small business by investors who expect a return in the form of equity or profit share.

Question 25

Define “overdraft.”

Answer 25

A facility provided by banks allowing businesses to withdraw more than is available in their account up to an agreed limit.

Question 26

What is “crowdfunding”?

Answer 26

Raising small amounts of money from a large number of people, typically via the internet, to fund a project or business.

Question 27

Define “depreciation.”

Answer 27

The reduction in the value of an asset over time, due to wear and tear or obsolescence.

Question 28

What is the “gearing ratio”?

Answer 28

A measure of a company’s financial leverage, showing the proportion of capital funded by debt.

Question 29

What is liquidity?

Answer 29

The ability of a business to meet its short-term financial obligations.

Question 30

What is the current ratio formula?

Answer 30

Current assets / Current liabilities.