Influences on Financial Management

Question 1

What is the second sub-heading of the finance syllabus?

Answer 1

Influences on Financial Management

Question 2

What are the three examples of internal sources of finance?

Answer 2

Retained profits, capital invested by owners and sales of unwanted assets

Question 3

What are the net profits that retain in the business called?

Answer 3

Retained profits

Question 4

What is the amount of money an owner puts into the business called?

Answer 4

Capital invested by owners

Question 5

What are some examples of where capital invested by owners could come from?

Answer 5

Personal savings, inheritance or personal loan/mortgage

Question 6

What is it called when the seller gains ownership of a form of cash from selling assets?

Answer 6

Sales of unwanted assets

Question 7

Why would a business owner want to sell their assets?

Answer 7

Machinery is outdated, plant/equipment is unproductive, property no longer in use

Question 8

What are the two forms of external finance?

Answer 8

Debt and equity

Question 9

When the business is lended money through an institution it’s called…

Answer 9

Debt

Question 10

When the business is lended money in exchange through shareholders it’s called…

Answer 10

Equity

Question 11

What are the three types of short-term borrowing?

Answer 11

Overdraft, commercial bills and factoring

Question 12

What is an agreement with the bank, allowing the business to overdraw from their accounts limit called?

Answer 12

Overdraft

Question 13

What is a form of borrowing from a financial institution, over $100000, for a period of 30-180 days called?

Answer 13

Commercial bills

Question 14

What is the process of a business selling its accounts receivable to a third party for cash called?

Answer 14

Factoring

Question 15

What are the four types of long-term borrowing?

Answer 15

Mortgage, leasing, debentures, unsecured notes

Question 16

What is a loan secured by the property of the business called?

Answer 16

A mortgage

Question 17

What is a form of long-term borrowing that is done with a fixed rate of interest for a fixed period of time?

Answer 17

A debenture

Question 18

What is a loan for a business for a set period of time, not secured against the business’s assets called?

Answer 18

Unsecured notes

Question 19

What is it called when a business rents non-current assets in return for an agreed recurring payment?

Answer 19

Leasing

Question 20

What are the two parts of debt, external finance?

Answer 20

Short-term and long-term borrowing

Question 21

What are the two parts of equity, external finance?

Answer 21

Ordinary shares and private equity

Question 22

What are the four types of ordinary shares?

Answer 22

Share purchase plan, new issues, right issues and placements

Question 23

What is money invested in a private company called?

Answer 23

Private equity

Question 24

What is it called when a individuals purchases shares in order to become a part-owner of a publicly listed company?

Answer 24

Ordinary Shares

Question 25

What is the difference between ordinary shares and private equity?

Answer 25

Ordinary shares is public, private equity is private

Question 26

What is the name of a share that is being sold for the first time?

Answer 26

New issue

Question 27

What is it called when a company requests existing shareholders for additional capital at a discount?

Answer 27

Right issue

Question 28

What is it called when shares are offered to major investors at a discount?

Answer 28

Placements

Question 29

What is it called when current shareholders are given the opportunity to purchase more shares at a discounted price, without brokerage fees?

Answer 29

Share purchase plan

Question 30

What are the seven types of financial institutions

Answer 30

Banks, investment banks, financial companies, life insurance companies, superannuation funds, unit trusts and Australian Securities Exchange

Question 31

The collection of funds to invest them in financial assets is done by who?

Answer 31

A financial institution

Question 32

What is a financial institution that accepts deposits from the public and provides credit?

Answer 32

A bank

Question 33

What is a financial institution that specialises in provides services to a business? What services?

Answer 33

Investment banks.
Arranging international finance, providing advice and managing portfolio investments

Question 34

What is a non-bank intermediaries that specialises in smaller commercial finances?

Answer 34

Finance companies

Question 35

What is financial contribution by employees to a fund that will provide benefits for them when they retire called?

Answer 35

A superannuation fund

Question 36

What is a non-bank institution that provides protection and benefits?

Answer 36

Life insurance companies

Question 37

What is a collective investment in which a large number of investors contribute to the funds called?

Answer 37

Unit trusts

Question 38

What does ASX stand for?

Answer 38

Australian Securities Exchange

Question 39

What are the two influences of government?

Answer 39

ASIC and company taxation

Question 40

What does ASIC stand for?

Answer 40

Australian securities and investment commission

Question 41

What does ASIC do?

Answer 41

Assists in reducing fraud and unfair practices in the financial market

Question 42

What is the process of paying money to the government on the profits of a business called?

Answer 42

Company taxation

Question 43

What are the three global market influences?

Answer 43

Economic lookout, availability of funds and interest rates

Question 44

What is the projected changes to the level of economic growth throughout the world called?

Answer 44

The economic lookout

Question 45

What is the ease in which a business can access funds called?

Answer 45

Availability of funds

Question 46

What is the ‘cost of borrowing money’ called?

Answer 46

Interest rates