TEST, AAAA

Question 1

Inventory (stock):

Answer 1

materials and goods required to allow

for the production and supply of products to the customer.

Question 2

Economic order quantity:

Answer 2

the optimum or least-cost
quantity of stock to re-order taking into account delivery
costs and stock-holding costs.

Question 3

Re-order quantity:

Answer 3

The number of units ordered each time.

Question 4

Lead time:

Answer 4

the normal time taken between ordering new

stocks and their delivery

Question 5

Buffer inventories:

Answer 5

the minimum inventory level that
should be held to ensure that production could still take
place should a delay in delivery occur or should production
rates increase.

Question 6

Just-in-time:

Answer 6

this inventory-control method aims to avoid
holding inventories by requiring supplies to arrive just as
they are needed in production and completed products
are produced to order.

Question 7

Start-up capital:

Answer 7

the capital needed by an entrepreneur

to set up a business.

Question 8

Working capital:

Answer 8

the capital needed to pay for raw
materials, day-to-day running costs and credit of ered to
customers. In accounting terms working capital = current
assets – current liabilities.

Question 9

Liquidity:

Answer 9

the ability of a firm to be able to pay its shortterm debts.

Question 10

Liquidation:

Answer 10

when a firm ceases trading and its assets are

sold for cash to pay suppliers and other creditors.

Question 11

Capital expenditure:

Answer 11

the purchase of assets that are
expected to last for more than one year, such as building
and machinery.

Question 12

Revenue expenditure:

Answer 12

spending on all costs and assets
other than fixed assets and includes wages and salaries
and materials bought for stock.

Question 13

Overdraft:

Answer 13

bank agrees to a business borrowing up to an

agreed limit as and when required.

Question 14

Factoring:

Answer 14

selling of claims over trade receivables to a
debt factor in exchange for immediate liquidity – only a
proportion of the value of the debts will be received as cash.

Question 15

Hire purchase:

Answer 15

an asset is sold to a company that agrees
to pay fixed repayments over an agreed time period – the
asset belongs to the company.

Question 16

Leasing:

Answer 16

obtaining the use of equipment or vehicles and
paying a rental or leasing charge over a fixed period, this
avoids the need for the business to raise long-term capital
to buy the asset; ownership remains with the leasing
company

Question 17

Equity finance:

Answer 17

permanent finance raised by companies

through the sale of shares.

Question 18

Long-term loans:

Answer 18

loans that do not have to be repaid for

at least one year.

Question 19

Long-term bonds or debentures:

Answer 19

bonds issued by companies to raise debt finance, often with a fixed rate of interest.

Question 20

Rights issue:

Answer 20

existing shareholders are given the right to

buy additional shares at a discounted price.

Question 21

Venture capital:

Answer 21

risk capital invested in business start-ups
or expanding small businesses that have good profit potential
but do not find it easy to gain finance from other sources.

Question 22

Crowd funding:

Answer 22

the use of small amounts of capital from a

large number of individuals to finance a new business venture.

Question 23

Microfinance:

Answer 23

providing financial services for poor and low-income customers who do not have access to banking services, such as loans and overdrafts offered by traditional commercial banks.

Question 24

Business plan:

Answer 24

a detailed document giving evidence
about a new or existing business, and that aims to convince
external lenders and investors to extend finance to the
business.

Question 25

Fixed costs:

Answer 25

costs that do not vary with output in the

short run.

Question 26

Variable costs:

Answer 26

costs that vary with output.

Question 27

Marginal costs:

Answer 27

the extra cost of producing one more

unit of output.

Question 28

Direct costs:

Answer 28

these costs can be clearly identified with each

unit of production and can be allocated to a cost centre.

Question 29

Indirect costs:

Answer 29

costs that cannot be identified with a unit

of production or allocated accurately to a cost centre.

Question 30

Break-even point of production:

Answer 30

the level of output at
which total costs equal total revenue, neither a profit nor a
loss is made.

Question 31

Margin of safety:

Answer 31

the amount by which the sales level

exceeds the break-even level of output.

Question 32

Contribution per unit:

Answer 32

selling price less variable cost

per unit.