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Flip to reveal answersDefine finance in Business Management.
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All 20 Flashcards — Role of finance in business
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Question
Define finance in Business Management.
Answer
Finance is the money available to a business to fund its activities, operations and growth.
💡 Hint
Money used to run/grow.
Question
What is start-up finance used for?
Answer
Start-up finance is used to cover initial costs before the business earns revenue (e.g., equipment, premises, initial stock).
💡 Hint
Costs before sales.
Question
What does “adequate finance” mean?
Answer
Having the right amount of finance available at the right time to meet the business’s needs.
💡 Hint
Right amount, right time.
Question
Finance is the ______ a business uses to fund its activities and growth.
Answer
Money.
💡 Hint
Simple definition.
Question
State one consequence of not having enough finance to pay suppliers.
Answer
Suppliers may stop delivering inputs, causing production or sales to halt.
💡 Hint
Suppliers stop supply.
Question
What is operating finance (working capital) used for?
Answer
Operating finance is used to pay day-to-day running costs such as wages, bills, rent and inventory purchases.
💡 Hint
Daily running costs.
Question
State one reason why a business needs finance at start-up.
Answer
To pay initial set-up costs such as equipment, premises and initial stock before revenue is earned.
💡 Hint
Before sales start.
Question
Start-up finance covers costs before the business earns ______.
Answer
Revenue.
💡 Hint
Before sales income.
Question
State one consequence of not having enough finance to pay employees.
Answer
Staff may leave (higher labour turnover), reducing productivity and service quality.
💡 Hint
Unpaid staff leave.
Question
Working capital is finance used for day-to-day ______.
Answer
Operations.
💡 Hint
Running costs.
Question
What is expansion finance used for?
Answer
Expansion finance is used to grow the business (e.g., new locations, new products, new markets, acquisitions).
💡 Hint
Money for growth.
Question
State one reason why a business needs finance for day-to-day operations.
Answer
To pay running costs such as wages, rent, utilities and suppliers.
💡 Hint
Keep operations running.
Question
Give one example of start-up finance.
Answer
Buying initial equipment such as an oven for a bakery or computers for a new office.
💡 Hint
Initial assets.
Question
Why can a profitable business still fail?
Answer
Because it may run out of cash (cash-flow problems) and be unable to pay short-term obligations.
💡 Hint
Profit ≠ cash.
Question
A profitable business can still fail without adequate ______ flow.
Answer
Cash.
💡 Hint
Profit ≠ cash.
Question
State one reason why a business needs finance for growth.
Answer
To fund expansion such as opening new branches, entering new markets or developing new products.
💡 Hint
Expansion needs cash.
Question
Exam skill: What three purposes of finance should you always distinguish?
Answer
Start-up finance, operating (working capital) finance, and expansion finance.
💡 Hint
3 purposes.
Question
State one reason why inadequate finance can limit competitiveness.
Answer
The business may be unable to invest in new equipment, marketing or product development, allowing competitors to overtake it.
💡 Hint
No investment.
Question
What does the phrase “finance is the fuel of a business” mean?
Answer
Without finance a business cannot buy resources, pay costs or invest, so operations stop and the business cannot survive.
💡 Hint
No money = no business.
Question
Give one example of operating finance.
Answer
Paying monthly wages and rent while waiting for customers to pay invoices.
💡 Hint
Cash gap.
Read the notes
Full study notes for Role of finance in business
Topic 3.1 hub
Introduction to finance
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BM exam skills
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