Understanding Financing in Business and Investment
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Questions and Answers

What is the primary purpose of financing in the context of business activities?

  • To create a market for money by connecting surplus and demand
  • To exploit the time value of money for personal gains
  • To generate returns for individuals with a surplus of money
  • To allow companies to purchase products beyond their immediate reach (correct)

Why do investors prefer to receive money today rather than the same amount of money in the future?

  • To take advantage of compounding interest (correct)
  • To generate immediate returns through investment
  • Due to the increasing value of currency in the future
  • Because currency depreciates over time

What role do financial institutions like banks and NBFS play in the financing process?

  • Providing capital to businesses and investors (correct)
  • Issuing credit cards to consumers
  • Creating a market for securities and derivatives
  • Generating profits through currency trading

According to the principle of the time value of money, why is a currency today worth more than the same currency in the future?

<p>Because money grows over time when invested (C)</p> Signup and view all the answers

What does financing leverage in order to put future expected money flows to use for projects started today?

<p>The power of compounding interest (D)</p> Signup and view all the answers

Why is financing considered vital in any economic system?

<p>To allow companies and individuals to leverage the time value of money (B)</p> Signup and view all the answers

Which of the following best describes the concept of opportunity costs mentioned in the text?

<p>The additional money earned by investing the money instead of keeping it in a mattress (C)</p> Signup and view all the answers

What is the main purpose of a finance lease as described in the text?

<p>To obtain the right to use an asset in return for regular rental payments (A)</p> Signup and view all the answers

What is the main difference between debt financing and equity financing, as mentioned in the text?

<p>Debt financing must be paid back with interest, while equity financing does not need to be paid back (A)</p> Signup and view all the answers

What does inflation do to the value of money over time, as mentioned in the text?

<p>Reduces its value (D)</p> Signup and view all the answers

What is the primary role of financial institutions, as discussed in the text?

<p>Providing capital to businesses, consumers, and investors to help them achieve their goals (D)</p> Signup and view all the answers

What is the main difference between $10,000 received today versus $10,000 received two years from now, as mentioned in the text?

<p>$10,000 today has more value and utility due to opportunity costs associated with the delay (A)</p> Signup and view all the answers

What type of assets are commonly leased as mentioned in the text?

<p>Property, buildings, and vehicles (C)</p> Signup and view all the answers

What best describes a finance lease according to the text?

<p>A type of lease where a finance company is typically the legal owner of the asset for the duration of the lease (D)</p> Signup and view all the answers

What does a lease agreement entail according to the text?

<p>The lessee also agrees to abide by various conditions regarding their use of the property or equipment. (D)</p> Signup and view all the answers

What is financing primarily used for according to the text?

<p>To obtain funds for business activities and making purchases. (D)</p> Signup and view all the answers

What is the main difference between full-service leasing and fleet management as described in the text?

<p>Full-service leasing includes covering vehicle resale value risk, while fleet management exposes the client to vehicle resale value fluctuations. (D)</p> Signup and view all the answers

What are the benefits of full-service leasing with Myathlon according to the text?

<p>No hidden extras, improved productivity, and outsourcing solutions (B)</p> Signup and view all the answers

What is the primary focus of fleet management from Myathlon as described in the text?

<p>Driver and asset management (C)</p> Signup and view all the answers

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