SIFY Week 6 Quiz: Sources of finance

When money is withdrawn from the bank account and the available balance goes below zero

• Micro finance

• Share capital

• Overdraft

• Government grant

Which of the following is the most suitable reason for using personal finance?

• Insufficient internal sources of finance
• Insufficient external sources of finance
• There is no interest obligation
• To please the owners (shareholders) of a company

Advantages of internal finance do NOT include

• Greater flexibility in the use of finance
• Greater choice of finance
• No need to go through administrative procedures
• Tax concessions for the use of internal profit

Businesses might choose to use external sources of finance because

• There are no interest charges
• Potential cash flow problems are eliminated

• There is insufficient retained profit
• There is an expected rise in interest rates

Which of the following is NOT a source of external financing for a public limited company

• Overdraft
• Debentures
• Retained profits
• Share capital

Advantages of funding growth through a share issue in all those listed below EXCEPT

• An extra source of finance
• Less financial risks due to the spreading of risks amongst shareholders
• Control of the company is diluted
• It acts as a form of motivation for employees who own shares in the company

Debentures can best be described as a form of

• short-term loan with variable interest rates
• Medium-term loan with variable interest rates
• Long-term loan with a fixed interest rate
• Long term security giving the holder part ownership of the business

Which of the following is the least likely source of funds for a non-profit organization?

• Fund-raising events
• Charitable donations
• Brand recognition
• Sponsorship deals

This is profit kept in the company rather than paid out to shareholders as a dividend.

• Net Profit

• Operating Profit

• Retained Profit

• Overdraft Profit

Which source of finance below would best be described as loan capital?

• Ordinary share capital
• Equity finance
• Debt factoring
• Debentures