Sources of funds

Which of the following is the most suitable reason for using personal finance?

• Insufficient internal sources of finance

• Insufficient external sources of finance

• There is no interest obligation

• To please the owners (shareholders) of a company

Advantages of internal finance do NOT include _________.

• Greater flexibility in the use of finance

• Greater choice of finance

• No need to go through administrative procedures

• Tax concessions for the use of internal profit

Businesses might choose to use external sources of finance because

• There are no interest charges

• Potential cash flow problems are avoided

• There is insufficient retained profit

• There is an expected rise in interest rates

Which of the following is NOT a source of external financing for a public limited company?

• Overdraft

• Retained profits

• Debentures

• Share capital

Which of the following is a drawback to a business that issues debentures

• Lenders do not have any voting rights

• There is a dilution of ownership

• There is dilution of control

• The value of liabilities increases

Debentures can best be described as a form of

• short-term loan with variable interest rates

• Medium-term loan with variable interest rates

• Long-term loan with a fixed interest rate

• Long term security giving the holder part ownership of the business

Equity shareholders are called_________________

• Owners of the company

• Partners of the company

• Executives of the company

The term ‘redeemable’ is used for __________.

• Ordinary shares

• Preference shares

• Commercial paper

• Public deposits

Public deposits are the deposits that are raised directly from

• the auditors

• the directors

• the owners

• the public

Debentures represent

• Fixed capital of the company

• Permanent capital of the company

• Fluctuating capital of the company

• Loan capital of the company