Sources of Finance

What does 'leasing' involve?

• Selling a fixed asset to raise funds

• Renting an asset for a specified period

• Borrowing funds to purchase an asset

• Exchanging equity for assets

What is a long-term source of finance used by public limited companies to raise capital?

• Overdraft

• Trade credit

• Share capital

• Bank loan

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

• Mortgage

• Debentures

• Bank overdraft

• Leasing

Which of the following is an internal source of finance?

• Bank overdraft

• Retained earnings

• Debentures

• Venture capital

What is the primary advantage of a bank loan as a source of finance?

• Flexibility in repayment terms

• No requirement for collateral

• Fixed interest rates

• Does not dilute ownership

Which of the following best describes 'venture capital'?

• Funds provided to high-risk, high-potential startups

• A government grant for small businesses

• A loan secured against property

• Funds raised through the sale of common stock

What is a primary characteristic of equity financing?

• It must be repaid after a certain period

• It charges a fixed rate of interest

• It gives investors ownership and voting rights in the company

• It is only available to sole proprietors

Which source of finance is typically the most expensive?

• Trade credit

• Bank overdraft

• Retained earnings

• Leasing

What is the main advantage of using retained earnings as a source of finance?

• No interest payments

• No repayment obligation

• It increases the company's market share

• It does not dilute ownership

What type of finance is 'angel investing'?

• Debt finance from financial institutions

• Equity finance from individual investors

• Government grants for technology firms

• Short-term loans from family and friends