Sources of Finance and Internal Finance Quiz

What are the main factors influencing the types of finance a business chooses to use?

• The number of employees in the business

• The purpose of the finance, objectives of the organization, amount of finance required, type of business, and length of time the finance is required

• The size of the office space

• The color of the business logo

Which of the following is an example of external finance?

• Owner investment

• Retained profit

• Bank loan

• Crowdfunding

What is the primary advantage of owner investment as a source of finance?

• Quick access to large amounts of capital

• It does not need to be paid back

• Full control of the business is maintained

• Tax benefits for the business

What is the main disadvantage of retained profit as a source of finance?

• Good business opportunities may be missed due to the time it takes to build up profits

• Requires repayment with interest

• Personal savings may be lost

• Difficult to obtain

What source of finance involves reinvesting profits made by the business in previous years?

• Share issue

• Retained profit

• Mortgage

• Bank loan

Which source of finance involves borrowing money from family or friends?

• Venture capital

• Hire purchase

• Loan from family or friends

• Bank overdraft

What is a potential disadvantage of owner investment?

• Inflexible repayment terms

• High interest rates

• Lengthy approval process

• Loss of personal savings if the business is unsuccessful

What source of finance is associated with selling shares of the company to investors?

• Grant

• Mortgage

• Leasing

• Share issue

Which source of finance does not require repayment?

• Bank loan

• Venture capital

• Retained profit

• Mortgage

What is a potential disadvantage of using retained profit as a source of finance?

• Repayment with interest

• Risk of bankruptcy

• Difficulty in obtaining approval

• Good business opportunities may be missed due to the time it takes to build up profits