introduction to finance & accounting

Question 1

what is borrowing?

Answer 1

lending (getting) money from a variety of places such as banks for a cost-often interest.

Question 2

what is saving?

Answer 2

lending (giving) money to a variety of places such as banks for gain-often interest.

Question 3

what is a principle?

Answer 3

the amount saved or earned at the start

Question 4

what is interest?

Answer 4

the amount of money earned when saving or borrowing.

Question 5

what are interest rates ?

Answer 5

the mathematical basis of calculating how much is earned on savings or borrowings expressed as a %.

Question 6

who sets interest rates?

Answer 6

central banks.
examples: Bank of England & Central Bank of Oman.

Question 7

What is simple interest?

Answer 7

Interest that is paid only on the principle of a loan and not on any interest.

Question 8

What is compound interest?

Answer 8

Interest that is paid on the principle amount and the accumulated interest of previous periods.

Question 9

start-up capital

Answer 9

the amount of money needed to start a business

Question 10

working capital

Answer 10

the capital needed to pay for raw materials, day-today running costs and credit offered to customers

the day to day finance needs of a business

Question 11

what is short term finance ?

Answer 11

money required for short periods of time up to one year.

Question 12

what is long term finance?

Answer 12

money required for more than one year.

Question 13

what is profit?

Answer 13

the value of goods sold (revenue) less costs.

Question 14

what is revenue ?

Answer 14

money coming into the business.

Question 15

external sources

Answer 15

Money that comes from outside the business
from banks and interest

Question 16

Internal sources

Answer 16

money that comes from within the business
from personal savings,selling assets and retained profit

Question 17

rights issue

Answer 17

when you sell more shares to existing shareholders to raise more finance

Question 18

bank overdraft

Answer 18

When a business can spend more money than it has in its account and it needs to be approved by the bank

Question 19

trade payables

Answer 19

where a business buys resources on credit and pays for them later (30-60 days)

Question 20

trade receivables

Answer 20

when a business offers credit to its customers who may not have to pay for 30-60 days

Question 21

current assets

Answer 21

cash or likely to be turned into cash within 12 months.

Question 22

current liabilities

Answer 22

depts that have to be paid within a year

Question 23

capital expenditure

Answer 23

money spent on non current assets such as buildings which will last more than a year

Question 24

revenue expenditure

Answer 24

money spent on day to day expenses such as wages and rent