1.3.4 - Sources of business finance

Which of the following is classed as a short-term source of finance?

• Trade credit

• Venture Capital

• Personal savings

• Retained profit

Which of the following is a reason why a new business start-up would need finance?

• To fund expansion

• To pay for replacement equipment

• To carry out maintenance on a new piece of machinery

• To pay a deposit for a premises

An established seasonal partnership is experiencing cash flow problems during the winter months. Which of the following would be a suitable source of finance to overcome this problem?

• Share capital

• Venture capital

• Overdraft

• Crowdfunding

A successful sole trader wants to raise funds to open a second restaurant and is eager to retain full control of the business. Which of the following sources of finance would be the most appropriate to fund this expansion?

• Gain a partner

• Arrange an overdraft facility

• Obtain a bank loan

• Issue new shares

Raising funds from a wide variety of small investors by publicising an idea on the internet is called:

• Personal savings

• Venture capital

• Trade credit

• Crowdfunding

A possible drawback to an entrepreneur of using personal savings to finance a new business enterprise is:

• The amount will need to be repaid with interest

• The amount available may be limited

• It is an expensive form of finance

• The entrepreneur may lose control of the business

Which of the following is a benefit to a private limited company of using retained profit to finance its growth?

• The business will not be required to pay dividends to its shareholders

• The business will pay less tax on its profits

• The amount will not need to be paid back

• The amount available will always match fully the company’s requirements

To which of the following businesses might a supplier be reluctant to issue trade credit?

• A new business start-up

• A successful franchise

• An established and thriving partnership

• A highly profitable and reputable private limited company

When using which of the following sources of finance would interest always need to be paid?

• Share capital

• A loan from family and friends

• Overdraft

• Venture capital

Which type of business would venture capitalists be usually interested in investing funds?

• An established private limited company

• A small business with slow sales growth potential

• A well-known franchise operation

• An entrepreneurial start-up with the possibility of high profits