3.1: Introduction to Finance

The text outlines the distinction between capital expenditure and revenue expenditure in business finance. Capital expenditure is long-term investment in fixed assets like land, buildings, and machinery. It aims to improve efficiency, capacity, and compliance. Revenue expenditure, on the other hand, covers daily operations costs like wages, materials, and utilities.

Capital Expenditure

Purpose: Improves efficiency, increases capacity, replaces outdated equipment, and complies with regulations.

Sources: Long-term sources like loans, equity, or selling assets.

Challenges: High costs and limited financing options.

Revenue Expenditure

Purpose: Covers daily operations and generates revenue.

Sources: Typically from current income or short-term loans.

Considerations: Must be managed to ensure profitability.