Business Finance Basics

False (B)

Trade credit

<p>market</p> Signup and view all the answers

<p>Buying kitchen equipment = Long-term finance Paying wages = Short-term finance Purchasing inventory = Short-term finance Opening a new office = Long-term finance</p> Signup and view all the answers

<p>Buying equipment for production (C)</p> Signup and view all the answers

<p>Up to one year</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Business expansion (D)</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>Working Capital = Current Assets - Current Liabilities</p> Signup and view all the answers

<p>establishing</p> Signup and view all the answers

<p>Equity capital (D)</p> Signup and view all the answers

<p>Start-up Capital = Initial funds needed to establish a business Working Capital = Funds for daily operations and expenses Long-term Finance = Money for purchasing fixed assets and expansions Debt Restructuring = Rearranging existing debt obligations</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>A manufacturer purchasing raw materials</p> Signup and view all the answers

<p>Fund marketing and branding efforts (B)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Avoiding cash shortages</p> Signup and view all the answers

<p>short-term financial</p> Signup and view all the answers

<p>Increased reliance on external funding (A)</p> Signup and view all the answers

<p>Purchasing a new computer (B)</p> Signup and view all the answers

<p>Ensuring Liquidity = Covers day-to-day operational expenses Maintaining Inventory = Prevents stockouts and production delays Managing Debts = Helps repay short-term loans Supports Growth = Enables investment in future opportunities</p> Signup and view all the answers

<p>True (A)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>payments</p> Signup and view all the answers

<p>To acquire or upgrade long-term assets that benefit the business over many years.</p> Signup and view all the answers

<p>revenue</p> Signup and view all the answers

<p>Capital Expenditure = Long-term asset acquisition or upgrade Revenue Expenditure = Short-term operational costs Example of CapEx = Purchasing a new machine Example of RevEx = Paying utility bills</p> Signup and view all the answers

<p>Establishing clear credit terms (B)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Improved cash flow</p> Signup and view all the answers

<p>Just-in-Time</p> Signup and view all the answers

<p>Negotiate longer payment terms (A)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Cost savings</p> Signup and view all the answers

<p>Establish clear credit terms = Trade Receivables Negotiate longer payment terms = Trade Payables Just-in-Time inventory = Managing Inventory Customer credit checks = Trade Receivables</p> Signup and view all the answers

The initial costs a business needs to start operating, including things like purchasing equipment, renting space, and marketing.

Money a business needs for everyday expenses, like paying employees, utilities, and buying supplies.

When a business needs to increase its size and capabilities, like opening new locations, hiring more staff, or developing new products, they often need more money.

Financial needs lasting less than a year, often used to cover day-to-day expenses or manage temporary cash flow issues.

Financial needs lasting for more than a year, often used for big purchases or projects that will benefit the business in the long run.

A common way businesses get short-term financing; it is basically a loan with no interest.

A service that allows businesses to get cash for invoices they've sent to customers but haven't been paid yet.

An arrangement with a bank that allows a business to overdraw its account for a short period, often used to cover temporary shortfalls in cash.

Funds needed to establish and start a business, covering costs like equipment, premises, employees, and marketing.

The difference between a company's current assets (like cash, receivables, and inventory) and its current liabilities (like payables and short-term debts).

Long-term financing with a duration of more than one year (up to several years or decades) used for major investments like fixed assets, business expansion, or long-term projects.

Investing in a business by buying equity shares, giving owners a part of the company.

Borrowing funds from banks or issuing bonds to finance long-term needs of a business.

Capital provided by investors (venture capitalists, private equity funds) to finance promising but risky businesses with high growth potential.

The initial funds needed for a business to start its operations, covering expenses like equipment, facilities, legal fees, and initial marketing.

Funds used for ongoing business operations, like paying salaries, rent, utilities, and supplies, ensuring smooth day-to-day running.

Ensuring sufficient cash flow to cover daily expenses, preventing cash shortages, and ensuring smooth operations.

Maintaining enough inventory to meet customer demands without running out of stock.

Using working capital to meet short-term financial obligations, like repaying loans or paying creditors on time.

Meeting financial commitments on time to enhance your reputation and gain trust from suppliers, partners, and customers.

Using working capital to invest in growth opportunities like expanding operations, entering new markets, or launching new products.

The ability to adjust to opportunities and handle challenges by having sufficient working capital.

Reducing reliance on external financing to minimize interest costs and potential debt-related risks.

The money customers owe a business after purchasing on credit.

Strategies used to ensure businesses have enough cash to operate and grow.

Giving customers a short time frame to settle their payments, to encourage quicker payouts.

Offering a discount to encourage customers to pay early.

The amount of money a business owes to its suppliers.

Negotiating longer terms with suppliers, allowing the business to pay later.

Using a system to track and manage inventory levels to minimize storage costs.

Ensuring the right quantity of goods are available to meet customer demands without excessive surplus.

Money spent on items that will benefit the business for many years, such as equipment, buildings, or machinery. These items are expected to generate income or improve efficiency over time.

Money spent on daily operations and maintaining existing assets. These expenses are short-term and are needed to keep the business running. They don't create new long-term assets.

This refers to spending money on things that last a long time, like a new building, or upgrading a computer system. The company expects to gain something from this expense for many years.

This involves spending money on things that are used up quickly, like paying employee salaries or buying office supplies. The money is spent to keep the business operating in the short term.

The difference between CapEx and RevEx can be remembered by considering the timeframe of benefit. CapEx provides a benefit over many years, while RevEx provides a benefit in the current financial period.