Capital - (Past Questions Review :Waec, Jamb, Cambridge O' Level)

A lack of working capital would mean that a business would

(a)be unable to purchase capital equipment. (b)have difficulty paying its expenses (c)sell less during a trading period. (d)stop trading because it is bankrupt.

EXPLANATION:Working capital is needed to settle the day to day expenses. Without it, business will have to sell asset

The issue of prospectus by a company is an invitation to members of the public to

(a)Subscribe to the company share (b)buy the company product (c)attend the company board meeting (d)propose a quotation

EXPLANATION: A company's prospectus is a formal legal document designed to provide information and full details about an investment offering for sale to the public. Companies are required to file the documents with the Securities and Exchange Commission (SEC).

Examples of current assets are

(a)cash and trade debtors (b)cash and trade creditors (c)trade debtors (d)trade creditors and cash

EXPLANATION:Current assets include:
cash in hand and bank,
cash equivalents,
accounts receivable,
stock inventory,
marketable securities,
pre-paid liabilities,
trade debtors.

Current assets are important to businesses because they can be used to fund day-to-day business operations and to pay for the ongoing operating expenses.

The difference between total current assets and total current liabilities of a business is known as?

(a)quick ratio (b)liquidity ratio (c)working capital (d)circulating capital

EXPLANATION: Working capital represents the difference between a company’s current assets and current liabilities.

Working capital assesses a company's ability to pay its current liabilities with its current assets.

Working capital is needed to find out the financial health of a firm within a year. This means the capacity to clear its debt within a year

The partner that only contributes part of the capital used in the formation and running of a business is known as

(a)a passive partner (b)an active partner (c)a dormant partner (d)a nominal partner

EXPLANATION:

The total of the share capital which a company would be allowed to issue is know as?

(a)called-up capital (b)paid up capital (c)nominal capital (d)issued capital

EXPLANATION: Authorised share capital is the maximum amount of capital that a company can issue to the general public or stakeholders.

The maximum amount is stated in its articles of association.

At times, the authorised share capital can also be called

• authorised stock
• authorised shares
• authorised capital stock
• registered capital
• nonominal capital

Debentures differ from shares in that

(a)they are secured on the company’s assets (b)ownership is open to the public (c)they form part of the capital of the business (d)rewards are usually paid out of profit.

EXPLANATION:A debenture is a medium to long-term loan, issued to a company by an investor.

Think of it as an unsecured loan that is supplied in good faith –

unlike UK debentures, the loan is not backed up by physical assets; only by the company's good reputation in the eyes of the investor.

A source of short-term finance to companies is?

(a)Share capital (b)Debentures (c)Retained earnings (d)Corporate tax

EXPLANATION: Short-term financing is a credit arrangement provided to an enterprise to bridge the gap between income and expenses in the short run.

It helps the enterprise to manage its current liabilities, for a period of less than one year.

It ensures the sufficient liquidity in the enterprise. i.e smooth functioning of the enterprise’s day-to-day activities.

Examples are

• Commercial Paper
• Unsecured Short-Term Bank Loans
• Secured Forms of Credit
• Customer Advances
• Installment Credit
• Bank Loan
• Cash Credit
• Certificates of Deposit
• Bill of Exchange
• Factoring
• Bank Overdraft.
• Retained Profit

Authorized share capital is also known as

(a)called-up share capital (b)paid-up share capital (c)registered share capital (d)issued share capital

EXPLANATION:Authorised share capital is the maximum amount of capital that a company can issue to the general public or stakeholders.

The maximum amount is stated in its articles of association.

At times, the authorised share capital can also be called

• authorised stock
• authorised shares
• authorised capital stock
• registered capital
• nonominal capital

The right to buy or sell stocks in the stock exchange with stipulated period is

(a)Option (b)Brokerage (c)Contango (d)Backwardation

EXPLANATION:A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date.
There are two types of options:

1. puts which is a bet that a stock will fall

2. calls, which is a bet that a stock will rise

An option is a security, just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties.

The document issued to a public company allowing it to commence business is the

(a)Article of association (b)Certificate of incorporation (c)Memorandum of association (d)Certificate of trading

EXPLANATION: A certificate that is issued to public limited companies (PLCs). All PLC’s are required to obtain a certificate of trading before they are able to trade. If the public company does trade before the certificate has been issued, the company and their officers may be liable to criminal penalties. The certificate is only issued if Companies House believe that the company complies with the relevant rules regarding the share capital requirement

Why are there more new businesses in retailing than in manufacturing?

(a) Fewer skills are required to run a retail outlet. (b)More capital is required to start retail trading. (c)Retailers can obtain bank loans without collateral security. (d)Retailers require larger premises than manufacturers.

EXPLANATION:Fewer skills are required to run a retail outlet.

You'll have 60 seconds to answer each question.

Time's Up

Score:

Your fingernails and hair keep growing after you die

Result

Total Questions: 9

Attempt: 8

Correct : 3

Wrong: 5

Percentage: 33%