Finance, Economics And Business

Question 1

What does finance do and how

Answer 1

Facilitates trade
By getting money from those who have it to those who can make good use of it

Question 2

What is the time value of money

Answer 2

Idea that £1 today is worth more than £1 tomorrow

Question 3

Future value symbol

Answer 3

F

Question 4

Present value symbol

Answer 4

Pv

Question 5

Risk free risk of return symbol

Answer 5

R

Question 6

Number of periods of investment symbol

Answer 6

N

Question 7

To the power of symbol

Answer 7

) ^

Question 8

Future value formula

Answer 8

Pv * ((1+r)^n)

Question 9

Present value formula

Answer 9

F / ((1+r)^n)

Question 10

Use future value and present value to provide time value of money

Answer 10

F = 1* ((1+0.01)^1) = 1.01
Pv = 1 / ((1+0.01) ^ 1) = 0.91

Question 11

What’s accounting concerned with

Answer 11

Counting/measuring, reporting

Question 12

Accounting equation, what is it also known as

Answer 12

Assets - liabilities = equity
Balance sheet

Question 13

What’s economics concerned with

Answer 13

Why things happen the way they do

Question 14

Economics definition

Answer 14

The theories, principles, and models that deal with how the market process works

Question 15

Behaviour characteristics of neo-classical economic models and explain each

Answer 15

Ppl behave rationally (logically)
Maximise utility
Act independently w full info

Question 16

Explain maximise utility

Answer 16

Ppl will behave logically to maximise utility

Question 17

Explain act independently w full info

Answer 17

don’t copy what everyone is doing, will rationally and logically assess all info available and will have understanding of all available info, in order to maximise health, wealth or happiness etc

Question 18

Define utility

Answer 18

health, happiness, money etc

Question 19

What’s neo-classical economics

Answer 19

Focuses on supply and demand as driving forces behind production, pricing and consumption of goods and services

Question 20

Is neo-classical economics ceteris paribus

Answer 20

Yes

Question 21

Ceteris paribus meaning

Answer 21

All else being equal

Question 22

4 factors of production

Answer 22

Natural resources
Labour
Capital
Entrepreneurship

Question 23

What’s natural resources

Answer 23

Land or materials

Question 24

What’s labour

Answer 24

Human input

Question 25

What’s capital

Answer 25

Human made products eg equipment or factories

Question 26

What’s entrepreneurship

Answer 26

Capacity and willingness to develop, organise and manage a business venture alongside any of its risks in order to make profit

Question 27

Resource characteristics of neo-classical economic models. 3

Answer 27

Property rights Scarcity of resources Opportunity costs

Question 28

What’s property rights

Answer 28

Ability to own and reuse resources

Question 29

Explain scarcity of resources

Answer 29

Limited resources to satisfy unlimited wants

Question 30

Explain opportunity costs

Answer 30

Scarcity of resource inevitably leads to benefits of one course of action being sacrificed in order to peruse a different one

Question 31

Type of business legal structures. 5

Answer 31

Sole trader/ sole proprietor Partnership Private limited company Public limited company (plc) Charity

Question 32

What’s a sole trader/sole proprietor

Answer 32

Sole owners of business who direct business affairs, bears its risks and losses and takes profits and benefits

Question 33

What happens if sole trader gets into debt

Answer 33

Unlimited liability so may have to use personal assets such as house or car to repay debt

Question 34

Who may be a sole trader

Answer 34

A plumber

Question 35

What’s a partnership Who may be a partnership

Answer 35

business w 2 or more owners who agree to direct affairs, bear risks and losses, and take profits and benefits) eg often an accountancy firm

Question 36

What’s a private limited company

Answer 36

incorporated business where owners have limited access to profits and limited personal liabilities for losses

Question 37

Difference in private and public limited company

Answer 37

Private can’t openly trade on stock market but public can

Question 38

What does incorporated mean

Answer 38

busi has its own legal identity which is separated from owners of busi, so incorporated busi getting into debt means owner won’t have to use personal assets to repay debt it’ll only use busi assets

Question 39

Who may be a private limited company

Answer 39

An nba team

Question 40

What’s a public limited company Eg

Answer 40

incorporated businesses where owner have limited access to profits through payments of dividends but also limited personal liability for losses so are also incorporated Eg adidas

Question 41

What does plc stand for

Answer 41

Public limited company

Question 42

What’s a charity

Answer 42

non profit org whose primary objectives are philanthropy and social well-being

Question 43

Sources of investment. 5

Answer 43

Personal loan Private loan Private investment Public investment Grant

Question 44

Personal loan

Answer 44

owner or friend may lend money that has to be paid back at some point alongside interest

Question 45

Private loan Eg

Answer 45

Money lended that’s to be paid back at some point w interest, usually from a financial institution

Question 46

Private investment

Answer 46

occurs in privateLCs where selected individuals are given oppor to buy ownership rights of busi in return for share of busi profits

Question 47

Public investment Eg

Answer 47

used in public LCSs where any individual can buy ownership rights of busi in return for share of busi profits via stock market, eg investment from dragons den

Question 48

What’s a grant

Answer 48

payments provided by either gov or private org for specific purpose such as training, expansion, r&d etc

Question 49

Factors influencing investment decisions. 4

Answer 49

Level of investment Level of return Level of risk Timing of return

Question 50

Npv formula

Answer 50

Pv - i

Question 51

Npv definition and what it tells you

Answer 51

difference between present value of cash inflows and present value of cash outflows over period of time, it tells you if an investment will be profitable down the line, demonstrates if investment returns more than required rate of return of investment

Question 52

Is it true that the price of publicly traded shares in a company only changes when the company releases its quarterly financial results.

Answer 52

No

Question 53

Is it true that financial theory assumes £1 today is worth less than £1 tomorrow as there is a risk you may lose some of that £1 through risky investments.

Answer 53

No

Question 54

What does i stand for

Answer 54

Initial investment