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HSC Business Studies: Finance Exam Q&A - Key Terms and Concepts, Exams of Business Economics

A comprehensive list of key financial terms and concepts relevant to hsc (higher school certificate) business studies, focusing on finance. It includes definitions and explanations of terms such as accounts payable, accounts receivable, various financial ratios, and different types of assets and liabilities. The document serves as a study aid for students preparing for finance exams, offering verified answers and concise explanations of essential financial principles and practices. It covers topics from cash-flow management to solvency and profitability ratios, providing a solid foundation for understanding business finance.

Typology: Exams

2024/2025

Available from 05/28/2025

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HSC Business Studies - Finance Exam
Questions With Verified Answers
accounts payable - Answer the money a business owes to its suppliers and service
providers. Also known as creditors or trade creditors
accounts receivable - Answer a current asset that represents money owed to the
business in short term. Money is owed to the business by customers who are yet to pay
for products they have already received. Also known as debtors.
accounts receivable turnover ratio - Answer ratio measures how long, on average,
account customers take to pay the invoices sent to them by the business. It indicates
how promptly customers who have been given credit, take to pay for products they have
bought.
amortisation - Answer depreciation of intangible assets over time. Also = repayment of
debt by a series of instalments
audit - Answer an independent check of the financial records of a business by a certified
accountant. Can also be performed internally by managers
balance Sheet - Answer snapshot on a particular day (usually last day of the financial
year) that shows the assets, liabilities and equity of the business. Gives an indication of
the financial stability of a business. A=L+E
benchmarking - Answer process of measuring performance against established
standards, such as a comparison of a firm's performance against standards set by
competitors in same industry in domestic market
budget - Answer Tool to evaluate the performance of a business by comparing actual
results with planned results. Usually drawn up as a spreadsheet illustrating the changes
in data over time.
capitalised expenses - Answer the costs incurred when financing a non-current asset and
added to the cost of the asset
cash-flow management - Answer management of cash flowing into business as revenue
and cash outflow when expenses are paid by a business --> ensures that the business
maintains its liquidity
cash-flow statement - Answer a financial report illustrating the movement of cash into
and out of a business over time
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HSC Business Studies - Finance Exam

Questions With Verified Answers

accounts payable - Answer the money a business owes to its suppliers and service providers. Also known as creditors or trade creditors

accounts receivable - Answer a current asset that represents money owed to the business in short term. Money is owed to the business by customers who are yet to pay for products they have already received. Also known as debtors.

accounts receivable turnover ratio - Answer ratio measures how long, on average, account customers take to pay the invoices sent to them by the business. It indicates how promptly customers who have been given credit, take to pay for products they have bought.

amortisation - Answer depreciation of intangible assets over time. Also = repayment of debt by a series of instalments

audit - Answer an independent check of the financial records of a business by a certified accountant. Can also be performed internally by managers

balance Sheet - Answer snapshot on a particular day (usually last day of the financial year) that shows the assets, liabilities and equity of the business. Gives an indication of the financial stability of a business. A=L+E

benchmarking - Answer process of measuring performance against established standards, such as a comparison of a firm's performance against standards set by competitors in same industry in domestic market

budget - Answer Tool to evaluate the performance of a business by comparing actual results with planned results. Usually drawn up as a spreadsheet illustrating the changes in data over time.

capitalised expenses - Answer the costs incurred when financing a non-current asset and added to the cost of the asset

cash-flow management - Answer management of cash flowing into business as revenue and cash outflow when expenses are paid by a business --> ensures that the business maintains its liquidity

cash-flow statement - Answer a financial report illustrating the movement of cash into and out of a business over time

cost centres - Answer the expenses associated with each key business function providing a product to consumers

credit policy - Answer conditions under which a business is willing to allow other businesses to postpone their payments for products they have bought from it; how many days are permitted to pass before payment is due

credit rating - Answer assessment of a business's ability to repay loans based on its past financial performance and repayment of past loans. Ratings are usually expressed as letter grades

creditors - Answer the businesses, financial institutions and individuals to which a business owes money. (accounts payable)

current assets - Answer assets (e.g. cash in bank, accounts receivable) that earn revenue for business in the short term --> usually fewer than 12 months

current ratio - Answer (also working capital ratio) measures a business's ability to pay its current liabilities from its current assets --> liquidity. Should be 2:1 or greater and expressed as percentage. Too much cash means it is not being invested, reducing profit

debentures - Answer type of long-term debt finance that a business can get by offering a prospectus to the general public of securities exchange. Business offers an investment opportunity to people who want a good return on risky investment.

debtors - Answer business or individuals that owe money to a business (accounts receivable)

depreciation - Answer (of assets) occurs where assets (e.g. motor vehicles, equipment) lose their value over time due to wear and tear and new tech. developments.

deregulation - Answer government's removal or reduction in controls and regulations on an industry or sector of the economy or market in order to achieve greater competition.

derivative - Answer special contract between global businesses. It is a type of hedging and is used to reduce financial risks, e.g. those created by appreciation and depreciation of currencies

dividend - Answer income earned from owning shares in a company. usually paid every 6 months and based on profits the company makes

grants - Answer financial gifts provided by government to assist businesses to expand or establish

gross profit - Answer Sales - COGS

gross profit ratio - Answer (PROFITABILITY) ratio measures a business's profitability before expenses. Higher the ratio the better, need to compare w/ industry standards and benchmarks. Express as %

hedging - Answer any strategy or financial tool used to reduce the risk of loss resulting from financial transactions - e.g. converting one currency to another

income statement - Answer summary of a business's revenue and expenses over a set financial period. completed in order to determine the business's profitability and efficiency. (Also called revenue statement, profit and loss statement)

insolvency - Answer when expenditure has exceeded income for an unacceptable length of time and firm is unable to pay debts

intangible asset - Answer asset that doesn't physically exist and is not written on a business's balance sheet unless business is sold. It is of value to the business because it can earn revenue from the asset - e.g. good rep., trademark, design, brand name.

invoice - Answer bill sent to a customer requiring payment by a specified date. invoices are primary documents in accounting because they are records of credit sales

leasing - Answer contract between user of an asset who pays the owners of the asset for use of the asset - e.g. equipment

leasing finance - Answer business 'hires' assets it needs for a period of time. business has the right to use the asset (e.g. car, machinery, building) without having to buy it. fee must be paid regularly which is a business expense

liabilities - Answer amounts of money owed to the individuals (suppliers, institutions like banks) that are part of the external environment

liquidation - Answer when all the assets of a business are sold to generate cash to pay liabilities and creditors

liquidity - Answer indicates how much ready cash is available in a business. current assets are listed in order of liquidity (how easily they can be turned into cash) savings in a business's bank account are most liquid as they are already cash

matching principle - Answer using the appropriate finance for purchasing an asset. current assets should be purchased with short-term finance, non-current assets should be purchased with long-term finance (e.g. 15 year mortgage loan). also relates to matching the recording of a transaction to the date it happened

monetary policy - Answer steps taken by the Reserve Bank of Australia (RBA) to affect the finance market and assist the federal government to achieve goal of low inflation and economic growth

working capital - Answer current assets used in the day-to-day running of a business

venture capital - Answer capital acquired from a specialist venture financial institution that seeks to become a part-owner in the business

variable costs - Answer costs that change when the business varies the amount of goods and services it produced. E.g. cost of raw materials

unit trust - Answer fund managed by a trustee (usually a company). it raises funds from investors which it holds in trust for them and invests those funds in various investments

retained profit - Answer net profit that is reinvested into the business. retained profit is

net profit ratio - Answer (PROFITABILITY) measure of a business's profitability after all expenses have been paid. Higher the ratio the better.

nominalised earnings - Answer earning adjusted to take into account cyclical upswings or downswings in the economy, or to remove one-time influences

on-costs - Answer additional costs to a business of employing staff

ordinary shares - Answer can be issued with or without the right to vote at the annual general meeting. ordinary shareholders receives dividends after preference shareholders.

productivity - Answer measure of how efficiently goods and services are produced

profit - Answer what remains from revenue after all expenses have been paid

profit and loss statement - Answer summary of a business's revenue and expenses over the financial year. completed in order to work out the business's profitability and efficiency.

COGS - Answer opening stock + purchases - closing stock

assets - Answer liabilities + owners equity