Sources of Finance

What does internal source of finance mean?

• A source from within the business

• A source from outside the business

What does external source of finance mean?

• A source from within the business

• A source from outside the business

Which is an example of an internal source of finance?

• Owner's Capital

• Venture Capitalist

• Overdraft

• Trade credit

Which is an example of an external source of finance?

• Owner's capital

• Hire Purchase

• Retained profits

• Sale of assets

Which is an example of an external source of finance?

• Owners' Funds

• Sale of assets

• Retained profits

• Bank loan

What is an advantage of a bank loan?

• There will be little or no interest
• You can pay in smaller installments
• They are quick and easy to arrange
• You don't have to pay it back

What is an advantage of owner's capital?

• There will be interest

• You can pay in smaller installments

• They take a long time to arrange

• You don't have to pay it back

What is an advantage of an overdraft?

• There is never interest

• You can pay in smaller installments

• Useful for relatively small sums and short term finance

• You don't have to pay it back

Which of these facts about venture capitalists is NOT true?

• Venture capitalists tend to operate in fairly risky markets

• Venture capitalists would be paid a share of the profits

• Venture capitalists usually provide money only and have no interest in running the business

• Venture capitalists usually invest large sums of money

Which of the following are DISADVANTAGES of selling shares as a source of finance? (select as many as appropriate)

• It means limited liability for the owners

• Dividends need to be paid to shareholders

• Large sums of money can be raised

• Does not apply to Partnerships or Sole Traders