Internal and External sources of finance

What does sources of finance mean?

• How businesses gain additional money when they are in financial difficulty

• Where businesses get money from to fund their business activities

• How businesses promote and advertise their business activities

Which of these is the correct definition of trade credit?

• Trade credit is where a business can spend more money than it has in its bank account

• Trade credit is money the business owners have invested through their own savings

• Trade credit is an agreement with a supplier to pay bills at a later date

Which of the following is a disadvantage of an overdraft?

• Offers flexibility

• Usually has a high interest rate

• Interest is only paid on the amount used

Which source of finance leads to a dilution of ownership?

• Personal savings

• Share capital

• Bank loan

Which of the following sources of finance incurs interest?

• Share capital

• Retained profit

• Bank loan

Which type of finance is not appropriate for a new start-up business?

• Government grants

• Owners capital

• Share issues

What is retained profit?

• Where business profits are reinvested back into the business

• Where business profits are taken out to pay shareholders

• Where a business fails to make a profit

Which of the following is not a type of internal finance?

• Retained profit

• Selling assets

• Family and friends

What is an advantage of a bank loan?

• Can get a significant amount of money at one time

• Paying interest

• Money must be paid back

Which two of the following are internal sources of finance for established businesses?

• Stock market floatation

• Selling assets

• Loan capital

• Retained profit

• Share capital