3.2 Sources of Finance

What is a common source of finance for a company that does not need to be repaid?

• Bank loan

• Government grant

• Overdraft

• Retained earnings

Which of the following is considered a long-term source of finance?

• Trade credit

• Bank overdraft

• Mortgage

• Factoring

What is the term for the profit that is kept within the company and used for investment or to pay debts?

• Dividends

• Retained earnings

• Share capital

• Venture capital

Which of the following is NOT an internal source of finance?

• Sale of assets

• Retained earnings

• Issuing bonds

• Reducing inventory levels

What type of finance is raised by selling shares of the company to the public?

• Debt financing

• Equity financing

• Leasing

• Overdraft

Which of the following is a disadvantage of using retained earnings as a source of finance?

• Interest must be paid

• It dilutes ownership

• It may not be sufficient for large investments

• It increases the company's debt-to-equity ratio

What is the main advantage of using trade credit as a source of finance?

• It is interest-free for a certain period

• It can be used to finance any type of expense

• It does not require collateral

• It improves the company's liquidity

Which of the following sources of finance would typically have the highest interest rate?

• Bank loan

• Mortgage

• Bank overdraft

• Government grant

What is the term for a loan that is secured against the borrower's property?

• Personal loan

• Business loan

• Mortgage

• Overdraft

Which of the following is a source of finance that involves obtaining funds from investors in exchange for a share of the business?

• Bank loan

• Venture capital

• Trade credit

• Overdraft