5.1

Question 1

Finance

Answer 1

Amount of money a business needs to buy assests and pay expenses.

Question 2

Business activities finance is needed for (4)

Answer 2

1. Start-up Capital - to start
2. Capital for expansion - purchasing fixed asses, investing in product dev
3. Additional working capital
4. Research and Development

Question 3

Cash

Answer 3

Physical movement of money within a business

Question 4

Profit

Answer 4

Surplus after al total costs have been deducted from sales revenue.

Question 5

Administration

Answer 5

When administrations’’ manage a business that is unable to pay its debts with the intention of selling it and trying to find a buyer for it

Question 6

Bankruptcy

Answer 6

Legal procedure of liquidating a business which cannot fully pay its debts out of its current assests

Question 7

Liquidation

Answer 7

When a business ceases trading and its assets are sold for cash to pay suppliers and other creditors

Question 8

Working capital

Answer 8

Amount of coaptial used to meed the day to day expense of a business such as fuel, bill, raw material etc.

Question 9

Consequences of failure of working capital (3)

Answer 9

1. Illiquid business
2. Too much capital in inventories and idle cash
3. Cash flow are sufficient to deal with anticipated working capital BUT too much working capital - Opportunity cost

Question 10

Ways to manage working capital