Business Revision Quiz 6 Sources of Finance and Variances

A bank loan will usually involve all of the following except?

• Security provided to the bank

• Interest charged on the outstanding amount

• Periodic repayments of the loan over its term

• Payment of dividends out of retained profits

A long-term loan designed to finance purchase of property is usually known as

• Mortgage

• Savings account

• Lease

• Overdraft

A downside of issuing shares to new investors is

• Cash flow worsens

• Loss of some control

• Dividends don't need to be paid

• The amount is treated as debt

Finance sourced directly from a firm's activities is known as

• Long-term

• External

• Internal

• Short term

Leasing would be the most appropriate way to finance the purchase of:

• Machinery and equipment

• Raw materials

• Inventories

• Advertising

Which of these sources of finance is likely to need security in order to be obtained?

• Share capital

• Bank loan

• Sale of assets

• Government grant

A key difference between a bank loan and a bank overdraft is that a loan

• Is treated as owners capital

• Is suitable for short-term cash flow needs

• Has fixed repayments and interest

• Does not have to be repaid

Which of these would increase the amount of capital invested in a business

• Issue of new shares

• Receipt of government grant

• Payment of dividend

• Credit given by suppliers

An advantage of using debt finance to help a business grow is that:

• There is no loss of shareholder control

• A growing business will always need more debt

• Interest costs will be low

• The debt won't need to be repaid for 5 years

A significant benefit of using retained profit as a source of finance is

• Lower liqudity

• Flexibility

• Higher working capital

• Higher cost