Review

Which is an example of an internal source of finance?

• Owners' Funds

• Leasing

• Hire Purchase

• Trade credit

Which is an example of an external source of finance?

• Owners' Funds

• Retained profits

• Sale of unwanted assets (fixed assets)

• Bank loan

The Board of Ching Shu, a debt collection firm, decides to postpone the payout of shareholder dividends. The funds are used to open new offices, increasing their circle of activity. The shareholders think this is a great move as they think this will increase their stock value over time.

• Debt Factoring

• Working Capital

• Retained Profits

• Leasing

A small accountancy firm knows it’s not tax season yet, but soon it will be. To pay the salaries, they dip slightly under the positive level of their bank account, knowing they’ll make enough next month to be in the black again.

This is an example of:

• Debt Factoring

• Owners' fund

• Trade Credit

• Overdraft

Michael rents a small space at his local garden centre selling fruit and vegetables he grows in his garden. He has forecasted the next three month's cash flow. Michael's cash-flow forecast is shown here. What is the net cash flow for the month July?

• $ 850

• $ 600

• $ 250

• $ 750

Michael rents a small space at his local garden centre selling fruit and vegetables he grows in his garden. He has forecasted the next three month's cash flow. Michael's cash-flow forecast is shown here. What is the closing balance for the month of June?

• $ 600

• $ 450

• ($ 200)

• $ 700

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

• Trade Credit

• Bank Loan

• Leasing

• Debentures

A company that use more current liabilities will have higher level of liquidity as well as its profitability.

• True

• False

Which of the following is an example of a cash in-flow for a business?

• payment to suppliers

• paying back a loan to a bank

• payment from debtors

• purchase of fixed assets

In general, which of the following is correct?

• Strong liquidity lowers the risk of business failure

• Liquidity is not connected to cash flow

• Good liquidity is the condition when the business has a negative net cash flow

• Good quality is the condition when the business has more bills to pay than it has cash coming in to pay them