Finance in Business Exam

What is the primary function of an income statement?

• Shows assets and liabilities at a specific point
• Records revenue, expenses, and net income over time
• Tracks only cash transactions
• Lists employee salaries and benefits

Which accounting equation correctly represents a balance sheet?

• Revenue - Expenses = Profit
• Sales - Costs = Net Income
• Assets = Liabilities + Owner's Equity
• Cash In - Cash Out = Balance

What is the most important purpose of maintaining a cash flow statement?

• To calculate yearly profits
• To monitor available cash for operations and obligations
• To track inventory levels
• To record fixed assets

Which saving strategy is considered most effective for business owners?

• Setting aside money before spending
• Investing all profits immediately
• Using credit for expenses
• Waiting until month-end to save

What distinguishes investing from saving?

• Investing has no risk
• Saving yields higher returns
• Investing focuses on long-term growth
• Saving requires more capital

How does compound interest work?

• Interest earned only on principal
• Fixed rate of return annually
• Interest earned on previous interest and principal
• Decreasing returns over time

What is break-even analysis used for?

• Calculating total revenue
• Determining when total costs equal total revenue
• Measuring market share
• Analysing competitor prices

Which type of credit is unsecured?

• Mortgage loan
• Vehicle finance
• Credit card
• Equipment loan

What is the principal amount in borrowing?

• The interest rate charged
• The total amount to be repaid
• The original sum borrowed
• The monthly payment

How can credit card interest charges be minimised?

• Making minimum payments
• Paying the full balance monthly
• Using multiple cards
• Extending payment terms