Section 5 quiz

Businesses need finance for:

• investment in other businesses

• the purchase of non-current assets

• improving their bank balance

• increasing credit to customers.

Which of the following is an internal source of finance?

• Debenture

• Share issue

• Retained profit

• Overdraft

The best source of finance for the purchase of a motor vehicle is:

• mortgage

• overdraft

• leasing

• working capital

Which of the following is a benefit of using internal sources of finance?

• Interest rates are low.

• It is always available.

• It is less costly than external sources.

• It is more costly than external sources.

An advantage of equity financing is that:

• it is available to all types of business

• it does not have to be repaid

• it has no cost to the business

• interest payments are low.

Micro-finance is usually for:

• entrepreneurs in developed economies who are able to borrow from banks

• when an entrepreneur needs a large amount of capital at low interest rates

• entrepreneurs in developing economies who are unable to borrow from other lenders

• established businesses in developing economies.

A cash-flow forecast shows the:

• timing of cash inflows and outflows over a period of time

• amount of cash a business earns from sales

• amount of profit a business earns over a period of time

• amount of cash a business has in its bank account

A short-term cash shortage might be financed by:

• not paying employees’ wages

• reducing dividend payments to shareholders

• taking out a bank loan

• offering discounts to credit sales customers

A business can improve its working capital by:

• increasing sales

• reducing inventories

• increasing credit terms to customers

• paying trade payables sooner than it needs to

Working capital measures:

• business profitability

• business efficiency

• business liquidity

• business productivity