Edexcel AS/A Level Business - Theme 2
Questions
1. What is Capital?
A. The profit made from selling a share for more than it was bought B. The money
provided by the owners in a business C. A long-term loan to a business D. Money raised
from outside the business
Correct Answer: B
Rationale: Capital, in this context, refers to the initial funds or assets invested by the
owners into a business to start or expand its operations.
1. What is Capital expenditure?
A. Spending on business resources that have already been consumed or will be very
shortly B. Money generated by the business or its current owners C. Spending on
business resources that can be used repeatedly over a period of time D. The practice of
selling assets and leasing them back from the buyer
Correct Answer: C
Rationale: Capital expenditure involves investing in long-term assets that provide
benefits over multiple accounting periods, such as property, plant, and equipment.
1. What is Internal finance?
A. Money raised from outside the business B. Money generated by the business or its
current owners C. A long-term loan to a business D. Money introduced into the
business through the sale of shares
Correct Answer: B
Rationale: Internal finance refers to funds that originate from within the business
itself, such as retained profits or the sale of existing assets.
, 1. What is Retained profit?
A. Profit distributed to shareholders as dividends B. Profit before tax that is reinvested
into the business C. Profit after tax that is 'ploughed back' into the business D. Profit
used to pay off short-term debts
Correct Answer: C
Rationale: Retained profit is the portion of a company's net income that is not
distributed to shareholders as dividends but is instead kept by the company to
reinvest in its core business or to pay off debt.
1. What is Revenue expenditure?
A. Spending on business resources that can be used repeatedly over a period of time B.
Spending on business resources that have already been consumed or will be very
shortly C. Money provided by the owners in a business D. The profit made from selling
a share for more than it was bought
Correct Answer: B
Rationale: Revenue expenditure refers to the costs incurred in the day-to-day running
of a business, which are consumed within the current accounting period, such as
wages, rent, and utilities.
1. What is Sale and leaseback?
A. The practice of buying assets and then selling them to a third party B. The practice
of selling assets, such as property or machinery, and leasing them back from the buyer
C. A method of financing where a business takes out a loan using its assets as collateral
D. The process of acquiring new assets through a leasing agreement without selling
existing ones
Correct Answer: B
Rationale: Sale and leaseback is a financial transaction where a company sells an
asset and immediately leases it back from the new owner. This allows the seller to
raise capital while retaining use of the asset.
1. What is Authorised share capital?
,A. The amount of current share capital arising from the sale of shares B. The maximum
amount that can be legally raised C. Money introduced into the business through the
sale of shares D. Share capital that is never repaid by the company
Correct Answer: B
Rationale: Authorised share capital is the maximum amount of share capital that a
company is legally permitted to issue to shareholders, as stated in its memorandum of
association.
1. What is a Bank overdraft?
A. A long-term loan to a business with fixed interest rates B. An agreement between a
business and a bank that means a business can spend more money that it has in its
account (going 'overdrawn') C. A type of loan where the lender requires security D.
Money raised from outside the business through issuing bonds
Correct Answer: B
Rationale: A bank overdraft provides a business with flexibility to manage short-term
cash flow fluctuations by allowing it to withdraw more money than is currently
available in its account, up to an agreed limit.
1. What is Capital gain?
A. The profit made from selling a share for more than it was bought B. The interest
earned on a long-term loan C. The dividend paid to shareholders annually D. The total
revenue generated from sales of goods or services
Correct Answer: A
Rationale: Capital gain is the profit realized when a capital asset, such as a stock,
bond, or real estate, is sold for a price higher than its original purchase price.
1. What is Crowd funding?
A. A traditional method of raising capital through bank loans B. Where a large number
of individuals invest in a business or project on the internet, avoiding the use of a bank
C. A form of government grant for small businesses D. Investment provided by a single
large venture capital firm
, Correct Answer: B
Rationale: Crowdfunding is a method of raising capital through the collective effort of
a large number of individuals, typically via online platforms, rather than through
traditional financial institutions.
1. What is a Debenture?
A. A short-term loan to a business B. An agreement allowing a business to spend more
than it has in its account C. A long-term loan to a business D. Money introduced into
the business through the sale of shares
Correct Answer: C
Rationale: A debenture is a type of bond or other debt instrument that is unsecured by
collateral. It is essentially a long-term loan that a company issues to raise capital.
1. What are Equities?
A. A type of long-term loan to a business B. Another name for an ordinary share C.
Money owed by the business to suppliers D. Non-physical assets such as brand names
Correct Answer: B
Rationale: Equities represent ownership interests in a company, typically in the form
of ordinary shares, which entitle holders to a portion of the company's assets and
earnings.
1. What is External finance?
A. Money generated by the business or its current owners B. Profit after tax that is
'ploughed back' into the business C. Money raised from outside the business D. Money
introduced into the business through the sale of shares
Correct Answer: C
Rationale: External finance refers to funds obtained from sources outside the
business, such as bank loans, issuing shares, or crowdfunding.
1. What is Issued share capital?
Questions
1. What is Capital?
A. The profit made from selling a share for more than it was bought B. The money
provided by the owners in a business C. A long-term loan to a business D. Money raised
from outside the business
Correct Answer: B
Rationale: Capital, in this context, refers to the initial funds or assets invested by the
owners into a business to start or expand its operations.
1. What is Capital expenditure?
A. Spending on business resources that have already been consumed or will be very
shortly B. Money generated by the business or its current owners C. Spending on
business resources that can be used repeatedly over a period of time D. The practice of
selling assets and leasing them back from the buyer
Correct Answer: C
Rationale: Capital expenditure involves investing in long-term assets that provide
benefits over multiple accounting periods, such as property, plant, and equipment.
1. What is Internal finance?
A. Money raised from outside the business B. Money generated by the business or its
current owners C. A long-term loan to a business D. Money introduced into the
business through the sale of shares
Correct Answer: B
Rationale: Internal finance refers to funds that originate from within the business
itself, such as retained profits or the sale of existing assets.
, 1. What is Retained profit?
A. Profit distributed to shareholders as dividends B. Profit before tax that is reinvested
into the business C. Profit after tax that is 'ploughed back' into the business D. Profit
used to pay off short-term debts
Correct Answer: C
Rationale: Retained profit is the portion of a company's net income that is not
distributed to shareholders as dividends but is instead kept by the company to
reinvest in its core business or to pay off debt.
1. What is Revenue expenditure?
A. Spending on business resources that can be used repeatedly over a period of time B.
Spending on business resources that have already been consumed or will be very
shortly C. Money provided by the owners in a business D. The profit made from selling
a share for more than it was bought
Correct Answer: B
Rationale: Revenue expenditure refers to the costs incurred in the day-to-day running
of a business, which are consumed within the current accounting period, such as
wages, rent, and utilities.
1. What is Sale and leaseback?
A. The practice of buying assets and then selling them to a third party B. The practice
of selling assets, such as property or machinery, and leasing them back from the buyer
C. A method of financing where a business takes out a loan using its assets as collateral
D. The process of acquiring new assets through a leasing agreement without selling
existing ones
Correct Answer: B
Rationale: Sale and leaseback is a financial transaction where a company sells an
asset and immediately leases it back from the new owner. This allows the seller to
raise capital while retaining use of the asset.
1. What is Authorised share capital?
,A. The amount of current share capital arising from the sale of shares B. The maximum
amount that can be legally raised C. Money introduced into the business through the
sale of shares D. Share capital that is never repaid by the company
Correct Answer: B
Rationale: Authorised share capital is the maximum amount of share capital that a
company is legally permitted to issue to shareholders, as stated in its memorandum of
association.
1. What is a Bank overdraft?
A. A long-term loan to a business with fixed interest rates B. An agreement between a
business and a bank that means a business can spend more money that it has in its
account (going 'overdrawn') C. A type of loan where the lender requires security D.
Money raised from outside the business through issuing bonds
Correct Answer: B
Rationale: A bank overdraft provides a business with flexibility to manage short-term
cash flow fluctuations by allowing it to withdraw more money than is currently
available in its account, up to an agreed limit.
1. What is Capital gain?
A. The profit made from selling a share for more than it was bought B. The interest
earned on a long-term loan C. The dividend paid to shareholders annually D. The total
revenue generated from sales of goods or services
Correct Answer: A
Rationale: Capital gain is the profit realized when a capital asset, such as a stock,
bond, or real estate, is sold for a price higher than its original purchase price.
1. What is Crowd funding?
A. A traditional method of raising capital through bank loans B. Where a large number
of individuals invest in a business or project on the internet, avoiding the use of a bank
C. A form of government grant for small businesses D. Investment provided by a single
large venture capital firm
, Correct Answer: B
Rationale: Crowdfunding is a method of raising capital through the collective effort of
a large number of individuals, typically via online platforms, rather than through
traditional financial institutions.
1. What is a Debenture?
A. A short-term loan to a business B. An agreement allowing a business to spend more
than it has in its account C. A long-term loan to a business D. Money introduced into
the business through the sale of shares
Correct Answer: C
Rationale: A debenture is a type of bond or other debt instrument that is unsecured by
collateral. It is essentially a long-term loan that a company issues to raise capital.
1. What are Equities?
A. A type of long-term loan to a business B. Another name for an ordinary share C.
Money owed by the business to suppliers D. Non-physical assets such as brand names
Correct Answer: B
Rationale: Equities represent ownership interests in a company, typically in the form
of ordinary shares, which entitle holders to a portion of the company's assets and
earnings.
1. What is External finance?
A. Money generated by the business or its current owners B. Profit after tax that is
'ploughed back' into the business C. Money raised from outside the business D. Money
introduced into the business through the sale of shares
Correct Answer: C
Rationale: External finance refers to funds obtained from sources outside the
business, such as bank loans, issuing shares, or crowdfunding.
1. What is Issued share capital?
