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Business Finance Overview

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Questions and Answers

What is the primary purpose of business finance?

To minimize operational costs

To manage employee salaries effectively

To estimate future market trends

To acquire and conserve capital funds (correct)

Which of the following best describes fixed capital requirements?

Funds needed for upgrading technology

Funds required for purchasing fixed assets (correct)

Funds needed for day-to-day operations

Funds used for holding current assets

How does the nature of a business impact its fixed capital requirements?

Only manufacturing concerns need substantial fixed capital

All businesses need equal fixed capital regardless of their nature

Trading concerns require more fixed capital than large enterprises

The amount of fixed capital varies based on business nature (correct)

What typically characterizes working capital requirements?

Funds needed for daily operational expenses Signup and view all the answers

Which business scenario would require more working capital?

A business selling goods on credit Signup and view all the answers

Why might a business require additional funds for technology upgrades?

To reduce production costs Signup and view all the answers

What factors can influence the amount of working capital needed by a business?

Sales turnover and credit sales Signup and view all the answers

What happens to the need for fixed and working capital as a business expands?

It increases due to greater operational scale Signup and view all the answers

Study Notes

Business Finance

Business finance deals with acquiring and managing capital to meet business needs.

Financial Needs Categories

Fixed Capital Requirements:
- Funds needed for long-term assets (land, buildings, machinery, equipment).
- Investment in fixed assets is long-term.
- The amount of fixed capital varies based on factors like business type, size (e.g., manufacturing needs more than trading). Larger businesses need more fixed capital compared to smaller ones.
Working Capital Requirements:
- Funds for day-to-day operations.
- Used for current assets (inventory, accounts receivable) and expenses (wages, taxes, rent).
- The amount required varies. Businesses with credit sales, slow sales turnover, or seasonal inventory needs require more than cash-based businesses with faster turnovers.
- Growing businesses, upgrading technology, or expanding inventory (for festivities) also increase working capital needs.
- Meeting debts or relocating also affect working capital requirements.

Importance of Funding Sources

Businesses must assess various funding sources to address their evolving financial requirements.

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Description

This quiz covers key concepts in business finance, focusing on the acquisition and management of capital for business operations. Learn about fixed and working capital requirements, their significance, and how varying business sizes influence these financial needs.