3.1 Introduction to Finance

Why do we need finance?

1.Setting up a business

2.Need to finance our day-to-day activities

3.Expansion

4.Research into new products

5.Special situations such as a fall in sales

Finance is required for many activities

working capital, capital assets, expansion, research, development, advertising.

Capital Expenditure

finance spent on purchasing long term/fixed assets such as land, buildings, equipment and machinery.

Revenue Expenditure

finance spent on day-to-day operation including wages, raw materials, rent and electricity. These are short -term costs

Fixed assets

items of monetary value that have a long-term function so can be used repeatedly/