Business Finance Quiz

What is the finance required to pay for day-to-day expenses in a business?

• Trade credit

• Debt factoring

• Bank overdrafts

• Working capital

What is the formula for calculating the working capital of a company?

• Current assets - Current liabilities

• Current assets + Current liabilities

• Fixed assets + Current liabilities

• Fixed assets - Current liabilities

Which source of finance involves selling of a company’s trade receivable claims for immediate money?

• Bank overdrafts

• Trade credit

• Debt factoring

• Hire purchase

What is the main benefit of equity finance for a business?

• Equity shareholders are the last one to receive the money

• Dividends must be paid whenever the business has profits

• No permanent increase in capital

• Ownership is not diluted

What is the main benefit of debt finance for a business?

• Never needs to be repaid

• Lenders have no voting rights

• Interest is paid before corporation tax

• Ownership is not diluted

What is the main disadvantage of reducing working capital in a business?

• Improved stakeholder confidence

• Negative impact on the company’s liquidity position

• Reduced opportunity cost of tying up money in current assets

• Increased liquidity position

What is the main purpose of venture capital for a business start-up?

• Provide advice for the business owners

• Sell shares when first formed

• Expect a part of ownership in the business

• Invest in businesses with good profit potential

What is the main purpose of microfinance for small businesses?

• Sell financial services to poor, low-income customers

• Provide grants with certain conditions

• Allow entrepreneurs to promote their business

• Encourage individuals to invest a small amount

What is the main purpose of crowdfunding for entrepreneurs?

• Receive initial capital plus interest

• Keep accurate records of investors

• Promote the business and encourage individuals to invest

• Expect a return on investment

What is the main purpose of grants for businesses?

• Given with certain conditions up on number of jobs, location, etc

• Sell financial services to poor, low-income customers

• Obtain the use of an equipment by paying a fixed rental charge

• Raise permanent capital for the business