Economics, Accounting & Business: Post your doubts here!

[zainabkhann]

Guys can someone please tell me the long term sources of finance that are required for the As business studies paper? Please let me know the definitions as well as the benefit/drawback

 

[zainabkhann]

Can someone please explain to me why the answer to this question involves overdraft, when it has asked about short term revenue expenditures? Shouldnt revenue expenditure consist of only retained profit and sales of assets ?

Question: State two sources of finance which could be used to finance revenue expenditure? (2)
Ans. Two sources of finance, to finance the short term needs of the business are
1). Retained profit over the years are ploughed back in to the business.
2). Overdraft: the business can draw up to an agreed amount from the bank and only make the interest payment on the amount borrowed and for that time period.

Question: 4a November 2007 Paper 1 (for Reference)

Please let me know as i am confused, thanks!

 

[Esme]

Can someone please explain to me why the answer to this question involves overdraft, when it has asked about short term revenue expenditures? Shouldnt revenue expenditure consist of only retained profit and sales of assets ?

Question: State two sources of finance which could be used to finance revenue expenditure? (2)
Ans. Two sources of finance, to finance the short term needs of the business are
1). Retained profit over the years are ploughed back in to the business.
2). Overdraft: the business can draw up to an agreed amount from the bank and only make the interest payment on the amount borrowed and for that time period.

Question: 4a November 2007 Paper 1 (for Reference)

Please let me know as i am confused, thanks!

retained profit and overdraft are not expenditure. They are the ways to pay for revenue expenditure. You're getting confused with the question. As revenue expenditure is in the short run, short term sources of finance have to be used. That is why overdraft is included.

 

[Esme]

7 The table shows details relating to a company’s banking transactions at 31 December.
$
balance at bank as per bank statement 22 650
uncleared lodgements 3 110
unpresented cheques 6 290
bank credit recorded twice by bank in error 650
Which balance for cash at bank should appear in the statement of financial position at
31 December?
A $18 820 B $20 120 C $25 180 D $26 480

Ans is A

I don't get why we have to subtract 650 to get the cash book figure.

650 was supposed to be credited only once, whereas the bank has made an error and credited it twice. So we have to reduce the balance on the bank statement by the extra 650. That is why we're subtracting it.

 

[Esme]

Economics M/J 09 P3
I don't understand this question. How is it an oligopoly? C is the answer.

 

[shaahid]

View attachment 24125
Economics M/J 09 P3
I don't understand this question. How is it an oligopoly? C is the answer.

My teacher asked an examiner and this was the explanation..
There are usually 3 firms in an oligopoly, so since the LRAC curve is for a single firm you should move it to the right 3 times. When you do this you will get the industry LRAC curve which touches the industry demand curve meaning that it is an oligopoly.

 

[Esme]

My teacher asked an examiner and this was the explanation..
There are usually 3 firms in an oligopoly, so since the LRAC curve is for a single firm you should move it to the right 3 times. When you do this you will get the industry LRAC curve which touches the industry demand curve meaning that it is an oligopoly.

Thanks that makes sense

 

[Esme]

Economics O/N 09 P31
This is how I'm calculating:
Y=C+I+G-T+X-M
we have to find X, so
600=400+80+100-90+X-120
X=230. But the answer in the marking scheme is C i.e 140. How?

 

[shaahid]

View attachment 24126
Economics O/N 09 P31
This is how I'm calculating:
Y=C+I+G-T+X-M
we have to find X, so
600=400+80+100-90+X-120
X=230. But the answer in the marking scheme is C i.e 140. How?

Tax is not a part of AD. You do not include it, it's C+I+G+X-M

 

[Esme]

Tax is not a part of AD. You do not include it, it's C+I+G+X-M

But we do deduct tax from govt spending as it is a leakage, just like imports.

 

[shaahid]

But we do deduct tax from govt spending as it is a leakage, just like imports.

Not all leakages are deducted from AD, just like savings. But you may have to ask an expert on this matter

 

[Esme]

Not all leakages are deducted from AD, just like savings. But you may have to ask an expert on this matter

We didn't deduct savings because there weren't any in this case.
But ummm ok. Thanks

 

[SalmanPakRocks]

Yes your working is correct. The answer in the marking scheme is wrong.
As for your second query, I'm not sure but I don't think preference shares should be included. Have you come across any other similar mcqs? You can check if they're adding preference shares in those questions too.

I've came across many while doing so and preference share was never included in Ordinary share holder's fund.

 

[SalmanPakRocks]

Guys can someone please tell me the long term sources of finance that are required for the As business studies paper? Please let me know the definitions as well as the benefit/drawback

These are given in the books.
1) Long term loans
2) Debentures
3) Reedemable Shares
4) Venture Captial etc.
Just google the advantages and disadvantages.

 

[zainabkhann]

These are given in the books.
1) Long term loans
2) Debentures
3) Reedemable Shares
4) Venture Captial etc.
Just google the advantages and disadvantages.

The way its listed in the book is a bit confusing, can you please write down the definitions for each one in ur own words, so i can use the same, will appreciate alot!

 

[zainabkhann]

retained profit and overdraft are not expenditure. They are the ways to pay for revenue expenditure. You're getting confused with the question. As revenue expenditure is in the short run, short term sources of finance have to be used. That is why overdraft is included.

Oh alright now i get it so revenue expenditure involves short term sources of finance, and capital expenditure involves long term? am i right?

 

[Esme]

I've came across many while doing so and preference share was never included in Ordinary share holder's fund.

Then they're not included and the answer for that question is wrong too.

Oh alright now i get it so revenue expenditure involves short term sources of finance, and capital expenditure involves long term? am i right?

Yes, short term finance is used for the payment of revenue expenditure (eg expenses such as rent etc) and long term finance is used to pay for capital expenditure (eg purchase of assets ect).

 

[SalmanPakRocks]

The way its listed in the book is a bit confusing, can you please write down the definitions for each one in ur own words, so i can use the same, will appreciate alot!

Okay:
1) Long term loans: These are financed by banks. This is long term liability and therefore is a long term fianance method.
2) Debentures: These are types of certificiate with a company issues in return for money required by the business. Debentures are not the owners of the company but rather are creditors, they're offered interest at an specific rate.
3) Reedemable shares: These shares are type of shares which expires after certain time, example 4 years or so. The company returns the money to the shareholder and takes it shares back.
4) Venture capital: It's a form of long term fianance in which a company attracts entreprenuers to invest in the company for a return.

 

[zainabkhann]

Okay:
1) Long term loans: These are financed by banks. This is long term liability and therefore is a long term fianance method.
2) Debentures: These are types of certificiate with a company issues in return for money required by the business. Debentures are not the owners of the company but rather are creditors, they're offered interest at an specific rate.
3) Reedemable shares: These shares are type of shares which expires after certain time, example 4 years or so. The company returns the money to the shareholder and takes it shares back.
4) Venture capital: It's a form of long term fianance in which a company attracts entreprenuers to invest in the company for a return.

Thankyou so much for this! il write these down

 

[zainabkhann]

Then they're not included and the answer for that question is wrong too.



Yes, short term finance is used for the payment of revenue expenditure (eg expenses such as rent etc) and long term finance is used to pay for capital expenditure (eg purchase of assets ect).

Thankyou for your reply, Can you please let me know which paper1 section b exam paper would have business finance questions? I havent seen any on my past paper book yet