PRINCIPLES OF BUSINESS FINANCE 1

TUTORIAL 1

Q1 : Briefly describe Business Finance.

Q2 : Differentiate between Tangible assets and Intangible assets.

Q3: Differentiate between Investment Decision (Capital budgeting) and Financing Decisions with
relevant examples.

Q4: Identify the situations below, if its investment decision or financing decision and justify your
answers.

a) A company wants to build a new manufacturing plant to expand its operations. Is this an
investment decision or a financing decision?
b) A company is considering issuing bonds to raise capital to finance its operations. Is this an
investment decision or a financing decision?
c) An individual investor is deciding whether to buy stocks in a new startup or in an established
company with a long history of profitability. Is this an investment decision or a financing
decision?
d) A company is considering leasing equipment instead of buying it outright. Is this an
investment decision or a financing decision?
e) A company is deciding to issue new shares of stock to raise capital for a new product
development project. Is this an investment decision or a financing decision?

Q5 :Define the followings:

a) Sole Proprietorships
b) Partnerships:
c) Corporations:

Q6 : Compare between sole proprietorships, partnerships and corporations with the following criteria:
ownership, liability, taxation, management, capital, duration.

Q7: Kelly is considering forming a partnership with her friend to start a small business. She is curious
about the advantages and disadvantages of forming a partnership. List the advantages and
disadvantages of forming a partnership.

Q8 : Identify if the statement below is TRUE OR FALSE

a) A corporation is a legal entity that is separate from its owners.

b) Shareholders of a corporation have unlimited liability for the debts and obligations of the
business.

c) Corporations can only raise capital through the sale of stock to investors.

d) A corporation's profits are taxed twice - once at the corporate level and again when they are
distributed to shareholders as dividends.

Q9: Explain the cashflow based on the diagram provided.