Sources and Uses of Funds Quiz

What are the sources of short-term funds?

• Supplier’s Credit

• Equity financing

• Corporate Bonds

• Banks

What is the maturity period of commercial paper?

• 1 to 180 days

• 1 to 30 days

• 1 to 364 days

• 1 to 270 days

What is the purpose of long-term funds?

• Funding for unforeseen events

• Payment of short-term obligations

• Allowance for receivables

• Acquisition of machineries and equipment

What is the type of financial instrument used in short-term financing that is backed by the assets of a firm?

• Repurchase Agreements

• Commercial Paper

• Promissory Note

• Asset-based Loan

What is equity financing?

• Raising capital by borrowing money from a lender

• Selling shares to investors to raise capital

• Using internally generated funds for expansion

• Obtaining funds from commercial banks

What is the advantage of equity financing?

• Principle and interest rates can be included in the budget

• Maturity period of your debt must be met

• Interest on loan is tax deductible

• Accessing the investor's network can contribute to the business's reputation

What is debt financing?

• Using internally generated funds for expansion

• Obtaining funds from commercial banks

• Selling shares to investors to raise capital

• Raising capital by borrowing money from a lender

What is the disadvantage of debt financing?

• Principle and interest rates can be included in the budget

• The owner might struggle to meet the obligations

• Business agreement ends after the loan is paid

• Interest on loan is tax deductible

Which financial institution provides long-term loans?

• Commercial Banks

• Credit Unions

• Savings and Loans

• Shadow Banks

What is a documentation loan?

• A loan that requires the borrower to consider higher interest rates

• A loan with lower interest rates and borrowing costs

• A loan demanding full details to substantiate income and asset statements

• A loan that does not involve assessing collaterals or any proof of income