Week 1 - Topic 1 - Unit Orientation Program

Question 1

What is finance?

Answer 1

The raising of money (capital)

Question 2

What is investment?

Answer 2

The making of money, using capital

Question 3

What are the 3 ways that we finance?

Answer 3

1. Exisitng funds of owners
2. Sharing ownership
3. Borrowing money

Question 4

What is the rate of return?

Answer 4

is the measure of investment performance, by measuring the percentage earned on the capital invested over a given invested and (typically per annum)

Question 5

What’s the formula to measure the rate of return?

Answer 5

Profit or Loss ÷ Capital invested

(therefore can be +tive/-tive)

Question 6

What are the 2 types of return that are relevant to the link between Finance and Investment

Answer 6

1. Required Rate of Return (RRoR)
2. Expected Rate of Return E(R)

Question 7

The Required Rate of Return (RRoR) is?

Answer 7

what we need to earn or the minimum that has to be earned

Question 8

The Expected Rate of Return is?

Answer 8

what we expect or forecast to earn

Question 9

Is capital free?

Answer 9

No because;
1. Shareholder/business owners need a return for owning the business
2. Creditors (whom money is borrowed from) require interest