These eight questions use invented businesses, so you can practise the skills from business finance. Try each one before opening the answer.
Questions
Q1. Label as internal or external funding: (a) the owner’s savings, (b) a bank loan, (c) profit kept in the business.
Answer
(a) Internal. (b) External. (c) Internal. The skill is in comparing internal and external funding.
Q2. A stall needs RM15 000. The owner has RM6 000 in savings and RM3 000 in kept profit. Find the funding gap.
Answer
Internal funds = 6 000 + 3 000 = RM9 000. Gap = 15 000 − 9 000 = RM6 000.
Q3. Compare savings and a bank loan for the gap in Q2 on cost, in one sentence.
Answer
“Savings cost no interest, whereas a bank loan must be repaid with interest, so savings are cheaper, but the stall has only RM9 000 of them.” Both options appear in the sentence.
Q4. Which type of finance suits RM1 500 of stock needed for one month: a 5-year loan or supplier credit? Explain.
Answer
Supplier credit. The purpose is running costs, and the need lasts each month, so it can be repaid from sales. A 5-year loan would carry interest long after the need ends. See matching finance to purpose and duration.
Q5. A shop buys a machine for RM9 000 on a 9-month loan, ignoring interest. The machine adds RM400 each month to profit. Find the monthly shortfall.
Answer
Repayment = 9 000 ÷ 9 = RM1 000. Shortfall = 1 000 − 400 = RM600 each month. A longer loan would lower the repayment.
Q6. Complete the forecast for April. Opening balance RM1 200, receipts RM5 000, payments RM6 500. Find net cash and closing balance.
Answer
Net cash = 5 000 − 6 500 = −RM1 500. Closing balance = 1 200 − 1 500 = −RM300. The business is RM300 short and needs a short-term source. The skill is in interpreting cash-flow forecasts.
Q7. A student says: “The negative balance means the business made a loss.” Correct this.
Answer
A negative closing balance shows a cash shortfall in that month, not a loss. The business may earn a profit over the year while cash timing leaves one month short.
Q8. A cafe can borrow RM10 000 over 2 years at a flat 5% a year, or use RM10 000 of savings. Calculate the loan’s total repayment and give a judgement if the café’s cash was tight twice last year.
Answer
Interest = 10 000 × 5% × 2 = RM1 000. Total = RM11 000. Monthly = 11 000 ÷ 24 = about RM458.
Judgement: the loan costs RM1 000 more, but it keeps the savings as a reserve, which matters because cash was tight twice last year. The loan is better, provided monthly income covers RM458. See evaluating financing trade-offs.
If you got these wrong
Q1 to Q3 belong to comparing internal and external funding. Q4 and Q5 need purpose and duration.
Q6 and Q7 use cash-flow forecasts. Q8 uses financing trade-offs, and the integrated case brings them all together.
The business case answer planner and the mistake log help you repeat and track. For teacher support, see online one-to-one Business tuition.