N5 Accounting - Sources of Finance

Which answers below are advantages of being a sole trader?

• As a sole trader the firm have more assets to secure a loan on

• The owner keeps all the rewards of their efforts - i.e. profits

• The sole trader can take quick decisions without having to refer to anyone else

• The owner has limited liability

• The business can be set up without much need for paper work or legal documents

Which answers below are disadvantages of being a sole trader?

• As a sole trader the firm have less assets to secure a loan on

• The owner cannot keep all the rewards of their efforts - i.e. profits

• The sole trader cannot easily share the burden of work and may not have all the expertise requried

• The owner has limited liability and is personally responsible for all debts

• The business can be set up without much need for paper work or legal documents

The proper term for the funds invested into a new sole trader firm by the owner is called ...

• Equality

• Equity

• Capital

• Investment

• Cash inflow

What is the name for a large amount of money borrowed from a bank to pay for property/premises?

• Overdraft
• Loan
• Mortgage
• Debt

Grants - which statement is false?

• Grants are only given out if criteria has been met
• Grants do not need to be repaid
• Grants only have a low rate of interest applied
• Grants are mainly issued by local and national Government and the EU

What name is given to the monthly amount of money paid back after a bank loan has been taken out?

• Deposit
• Withdrawal
• Instalment
• Standing order

What source of finance involves paying a deposit for an asset then making monthly payments, after which you own the asset outright.

• Leasing
• Renting
• Hire purchase
• Savings

Which source of finance's benefits are that it can be repaid over a long period of time and can be arranged quickly.

• Bank loan
• Sale of shares
• Retained profits
• Owner's savings

Which source of finance do most sole traders use at the start of the business?

• Own savings
• Retained profits
• Donors
• Debentures

Fill in the blank - a disadvantage of using retained profits as a source of finance is that the money cannot be _____ for something else.

• used
• deposited
• borrowed
• controlled