INTRODUCTION TO FINANCE

The expenditure on a fixed asset (such as a machine) or monetary asset (such as shares or bonds) that affects the net cash flow is called:

• Investment expenditure OR

  Capital expenditure

• Revenue Expenditure

• Occasional cost

• Production cost

Raising money through internal sources is free of any cost.

• True

• False

For working capital requirements, it is better for businesses to use overdrafts than loans because:

• Businesses can get overdrafts for longer terms.

• The interest rates are lower for overdrafts than for long-term loans.

• An overdraft is a temporary arrangement and is useful for short-term purposes.

• all of the options

A company may make use of hire purchase for its machinery for a new plant. Hire purchase is:

• Partly short-term and partly long-term finance

• Immediate-term finance

• Short-term finance

• Medium-term finance

One of the main disadvantages of debt factoring over other forms of finance is:

• Since many factoring companies exist, prices are usually competitive.

• The factor takes a long time to provide the finance.

• Debt factoring can be expensive. 

• The risk of collecting the debt is passed on to the factor.

One advantage for a business of raising equity capital over taking out a long-term loans is:

• Costs of raising equity capital are low.

• It never has to be repaid.

• Ownership is retained by the business.

• All of the reasons

Venture capitalists prefer investing in start-ups because:

• They are easy to keep track of and control.

• They see a higher rate of return in start-ups in the future with an equity stake.

• They do not require high amounts of capital.

• All of the reasons

Which one of the following sources of finance requires the payment of interest?

• Loan capital

• subsidies

• trade credit

• leasing

___________refers to an increase in prices and is usually calculated as an annual rate.

• loss

• depreciation

• Inflation

• evaluation

What is the word for an amount of money usually given by the government, a foundation or other agency to a person or organisation for a special purpose that does not need to be repaid? 

• Donations

• Grants and/or subsidies (from the government)

• Taxes

• All of the options