What is the primary reason businesses use commercial bills as a source of finance?

To access large short-term loans with flexible repayment terms

Which of the following is the greatest risk a business faces when using factoring as a source of finance?

Receiving less cash than the total value of accounts receivable

What is the main difference between financial and operating leases?

Financial leases have fixed repayments and cover the asset’s economic life

What is the main advantage of an unsecured note for a company raising finance?

It does not require collateral, allowing easier access to funds

An advantage of debt finance is

Interest payments are a tax deduction

How does company taxation impact financial management?

It reduces the amount of profit available to reinvest in the business

Why might a company choose a share placement instead of a new issue (IPO)?

A share placement issues shares to select investors, bypassing regulations.

What is the key risk associated with borrowing funds from overseas?

Changes in foreign exchange rates affecting repayment costs

Which of the following describes private equity?

Investments made in companies not listed on a stock exchange

How does a weak global economic outlook typically affect unemployment and exchange rates in Australia?

Higher unemployment & weaker AUD due to reduced international demand

Why might a business choose leasing instead of purchasing an asset?

Leasing allows businesses to use equipment without a large capital outlay

How does a weak global economic outlook typically affect Australian businesses?

It lowers demand for exports and makes funding harder to obtain

One of the reasons businesses need finance is

To maintain cash flow for day-to-day operations

How do fluctuations in interest rates affect businesses that borrow money?

Higher interest rates increase borrowing costs and reduce profitability

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Yr 12 - Finance Chunk 2

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Questions 19

Answers

1
What is the primary reason businesses use commercial bills as a source of finance?
To reduce their reliance on retained profits
To secure funding from shareholders
To access large short-term loans with flexible repayment terms
To obtain long-term funding for expansion
2
Which of the following is the greatest risk a business faces when using factoring as a source of finance?
Being unable to secure additional financing in the future
Losing ownership of company assets
Increasing its long-term liabilities
Receiving less cash than the total value of accounts receivable
3
What is the main difference between financial and operating leases?
Operating leases last longer than financial leases
Operating leases involve ownership transfer, financial leases do not
Financial leases can only be used for vehicles
Financial leases have fixed repayments and cover the asset’s economic life
4
Which of the following is the riskiest form of long-term debt finance for a lender?
Mortgages
Unsecured notes
Debentures
Bank loans
5
What is the main advantage of an unsecured note for a company raising finance?
It carries a higher interest rate than secured loans
It is guaranteed by government regulations
It is available only to large multinational corporations
It does not require collateral, allowing easier access to funds
6
An advantage of debt finance is
Does not have to be repaid within a certain timeframe
It increases company equity
Interest payments are a tax deduction
Ownership of the business is diluted
7
How does company taxation impact financial management?
It increases the value of company assets
It determines the level of customer demand
It reduces the amount of profit available to reinvest in the business
It prevents companies from issuing new shares
8
Why might a company choose a share placement instead of a new issue (IPO)?
A share placement requires government approval
A share placement raises more capital than an IPO
A share placement is only available for small businesses
A share placement issues shares to select investors, bypassing regulations.
9
Which of the following is NOT a source of short-term debt?
Commercial bill
Factoring
Debenture
Overdraft
10
What is the key risk associated with borrowing funds from overseas?
Higher domestic tax rates
Limited availability of funds
Increased competition from international businesses
Changes in foreign exchange rates affecting repayment costs
11
Which of the following describes private equity?
Investments made in companies not listed on a stock exchange
Funds borrowed from a bank
Government-issued securities
Shares sold on the ASX
12
How does a weak global economic outlook typically affect unemployment and exchange rates in Australia?
Lower unemployment, stronger AUD as foreign investment increases
Higher unemployment, stronger AUD as businesses reduce exports
Lower unemployment, weaker AUD due to increased government spending
Higher unemployment & weaker AUD due to reduced international demand
13
Why might a business choose leasing instead of purchasing an asset?
Leased equipment is owned by the business after five years
Leased equipment is always cheaper than purchasing
Leasing allows businesses to use equipment without a large capital outlay
Leasing is only available for government organisations
14
Which financial institution provides advisory services primarily to businesses and governments?
Superannuation funds
Unit trusts
Investment banks
Banks
15
How does a weak global economic outlook typically affect Australian businesses?
It strengthens the Australian dollar
It lowers demand for exports and makes funding harder to obtain
It encourages businesses to take on more debt
It increases consumer spending
16
One of the reasons businesses need finance is
To reduce the need for marketing
To improve employee satisfaction
To maintain cash flow for day-to-day operations
To increase company profits directly
17
How do fluctuations in interest rates affect businesses that borrow money?
Changes in interest rates only affect international businesses
Lower interest rates increase the cost of repayments
Higher interest rates increase borrowing costs and reduce profitability
Higher interest rates make borrowing cheaper
18
Short term debt has to be repaid within
2 years
12 months
5 years
6 months
19
The purpose of a bank overdraft is to assist a business with...
marketing campaigns
Long-term investment
Hiring of staff
Short-term liquidity problems

Yr 12 - Finance Chunk 2 Flashcards | StudBud