Sources of Finance

Which of the following is an internal source of finance?

• Trade credit

• Leasing

• Retained profit

• Overdraft

A key difference between a bank loan and an overdraft is that a loan...

• Does not have to be repaid

• Has fixed repayment and interest

• Is suitable for short-term cash flow needs

• Is treated as owners capital

A downside to issuing shares to new investors is....

• The amount is treated as debt

• Dividends don't need to be paid

• Cash flow worsens

• Loss of some control

A long-term loan to buy property is known as a

• Lease

• Savings account

• Mortgage

• Overdraft

Which of these sources of finance is likely to require security in order to be obtained?

• Loan

• Government grant

• Share capital

• Sale of assets

The issue of shares for the first time on the stock exchange is a

• Dividend

• Equity withdrawal

• Rights issue

• Flotation

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

• Share capital

• Venture capital

• Crowdfunding

• Trade credit

Which of the following is an advantage to an entrepreneur of using venture capital to secure finance for a business start-up?

• 100% of profits are always retained by the entrepreneur

• Large amounts of finance are usually available

• Control is never lost within the business

• The venture capitalist funds will never need repaying

Which of the following is an advantage to a start-up business of using an overdraft?

• Guaranteed funds from the bank for every start-up

• Interest rates will always stay the same increasing business certainty

• It provides flexibility to a business when it is short of cash

• It will never be recalled at very short notice

Which of the following is a drawback to a sole trader of becoming a private limited company in order to raise finance for expansion?

• The amount generated will need to be repaid

• A dividend must always be paid each year to the shareholders

• Interest will need to be paid on the amount raised

• The process to change the type of ownership is time consuming