INTRODUCTION TO FINANCE Flashcards

1
Q

Capital Expenditure

A

Money spent on fixed assets, assets that last a long time and can be re-used.
These fixed asssets are needed for the purpose of generating income for the business over the long term.

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2
Q

Revenue Expenditure

A

Revenue expenditure refers to the costs a business incurs through its regular operations, such as wages, utilities, and repairs. These costs are charged to expenses immediately and do not result in acquiring long-term assets. They impact the business’s operating income within the same period they’re incurred.

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3
Q

Collateral

A

Due to the high initial cost,most fixed asses can be used as collateral (finanical security pledged for repayment of a particular cource of finance such as bank loans)

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4
Q

Why do businesses need to make sure that they don’t have consistent high revenue expenditures?

A

Because it makes it difficult for them to build sufficient capital to make long-term investments. Also it will be harder for them to get out of a sudden situation crisis.

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