Igcse Business - 19 SOurces of Finance test

A small tech startup decides to use its retained earnings to fund the development of a new software product. Which source of finance is the company using?

• Internal, long-term

• External, short-term

• External, long-term

• Internal, short-term

A manufacturing company obtains a bank loan to purchase new machinery for its production facility. What source of finance is this?

• External, long-term
  

• Internal, short-term
  

• External, short-term
  

• Internal, long-term

A large construction company issues corporate bonds to raise funds for a major infrastructure project that will take several years to complete. What source of finance does this represent?

• External, long-term

• External, short-term

• Internal, short-term

• Internal, long-term

What is one advantage of using retained profit as a source of financing in a business?

• It allows the company to generate immediate cash flow.

• It reduces the need to borrow money from external sources, thereby avoiding interest expenses.

• It provides tax benefits in the form of deductions on retained earnings.

• It allows shareholders to receive higher dividend payments.

In the context of a successful tech startup, which of the following scenarios best illustrates the use of retained profit?

• The company secures a bank loan to fund its expansion into international markets.

• The company distributes a portion of its earnings as dividends to its early investors.

• he company reinvests its profits to develop a new product line and expand its research and development team.

• The company sells some of its office equipment to generate cash for day-to-day operations.

A manufacturing company decides to sell some of its outdated machinery to free up cash for investing in newer, more efficient equipment. What is the primary reason for this sale of non-current assets?

• To generate additional revenue for day-to-day operational expenses.

• To reduce the company's tax liability.

• To create space in the factory for new machinery.

• To unlock capital for investment in more productive assets.

In the context of a retail store, what is the most accurate definition of "working capital"?

• A) The store's total revenue generated over a year.

• B) The difference between the store's total assets and total liabilities.

• C) The profit earned by the store from its day-to-day operations.

• D) The amount of cash and assets readily available to cover short-term expenses and obligations.

A construction company is planning to purchase materials, pay labor costs, and cover other short-term project expenses for an upcoming building project. Which source of finance will the company need to manage effectively to ensure the project runs smoothly?

• A) Long-term debt
  

• B) Gross profit
  

• C) Working capital
  

• D) Accounts receivable

A small retail store has current assets of $50,000 and current liabilities of $30,000. What is the working capital of the store?

• A) $80,000
  

• B) $20,000
  

• C) $50,000
  

• D) $30,000

A manufacturing company reports current assets of $150,000 and current liabilities of $120,000. What does this working capital figure indicate about the company's short-term financial position?

• A) The company has a shortage of short-term funds to cover its obligations.
  

• B) The company has an excess of short-term funds available for investment.
  

• C) The company's long-term debt exceeds its short-term debt.
  

• D) The company's gross profit is negative.