3.4 Sources of finance Unit 1 VCE Business Management

Equity refers to the funds contributed by the business owners to start and then expand the business.

• True

• False

An owner who contributes equity to a business retains no control over how that finance is used.

• True

• False

Debt refers to the funds provided by banks, other financial institutions, government and suppliers.

• True

• False

Debt must be paid back when the borrower has the capacity to pay.

• True

• False

Equity does not have to be repaid unless the owners leave the business.

• True

• False

A bank overdraft allows a business or individual to overdraw their account up to an agreed limit.

• True

• False

Trade credit allows a business to trade by borrowing over the long term.

• True

• False

Leasing involves the payment of money for using machinery that is owned by the business.

• True

• False

Governments can provide finance in the form of grants for business development.

• True

• False

Businesses must find the source of finance that is most appropriate to fund the activities arising from their decisions.

• True

• False