3.1 Introduction to finance

Capital expenditure

• Capital expenditure is finance spent on fixed assets, for example: buildings, land, equipment, vehicles, etc. These are long term (over 12 months)

Examples of Capital Expenditure

• Capital Equipment

• Furniture, fixtures, and fittings

• Computers and IT systems

• Intellectual Property

• Machinery

• Mergers and Acquisitions

• Property and premises

• Vehicles

Revenue expenditure

Revenue expenditure is finance spent on the daily operations of a business, such as: rent, utility bills, wages, etc. These are short term (within 12 months)

Examples of Revenue Expenditure

• Advertising and promotion

• Energy Costs

• Freight and delivery

• Insurance

• Office supplies and administration

• Raw materials and components

• Rent

• Wages and salaries

Collateral

refers to the financial guarantee for securing external loan capital to finance investment expenditures for business growth

Fixed Asssets (non-current assets)

refers to items of monetary value that have long term function for businesses, and is used repeatedly for production purposes