3.2 Sources of Finance

Which internal source of finance is specifically available to sole traders?

• Retained Profits

• Personal Funds

• Sale of Assets

• Share Capital

Which external source of finance involves obtaining funds from individuals or groups of investors who provide financial backing in exchange for ownership equity or convertible debt?

• Share Capital

• Loan Capital

• Overdrafts

• Trade Credit

Which of the following is an internal source of finance?

• Share Capital

• Loan Capital

• Trade Credit

• Retained Profit

What type of business is likely to use personal funds as an internal source of finance?

• Corporation

• Partnership

• Sole Trader

• Limited Liability Company

Which of the following options represents an advantage and a disadvantage for privately held companies?

• • An advantage is unlimited liability protection for owners, whereas a disadvantage is lack of privacy in financial disclosures.

• • An advantage is greater access to capital, whereas a disadvantage is limited control and flexibility for owners

• • An advantage is unlimited liability for owners and a disadvantage is limited growth potential.

• • An advantage is greater control and flexibility for owners whereas a disadvantage is limited access to public capital.

Scenario:
OmarR Electronics is a startup company specialising in innovative smart devices. They need additional funds to expand their product line and reach new markets. The management is considering various sources of finance. OmarR Electronics decides to approach a group of individual investors who are interested in supporting promising startups.

Which source of finance are they seeking?

• • Crowdfunding

• • Microfinance providers

• • Business angels

• • Loan capital

Scenario:
Zoe's Fashion Ltd is a well-established clothing brand known for its high-quality and trendy designs. The company's management plans to open a new flagship store in a prime location to attract more customers and boost sales. However, they need additional funds to cover the expenses of setting up the store and expanding their product range.

Which external source of finance would be most suitable for Zoe's Fashion Ltd to secure funds for opening the new flagship store?

• Personal Funds

• Trade Unions

• Crowdfunding

• Loan Capital

Scenario:
HTech Innovations is a cutting-edge technology company specialising in developing advanced software solutions for various industries. The company aims to expand its operations into new international markets and invest in research and development to stay ahead of the competition. To achieve these ambitious goals, HTech Innovations needs significant financial resources.

Which combination of external sources of finance would be most suitable for HTech Innovations to fund its expansion into new international markets and research and development initiatives?

• • Share capital and trade credit

• • Leasing and microfinance providers

• • Loan capital and business angels

• • Crowdfunding and personal funds

Finance for a business refers to:

• • The human capital employed by the business

• • The money the business uses to fund its activities

• • The equipment and machinery used in production

• • The physical location of a business

Capital expenditure does not include spending on:

• Buildings

• Vehicles

• Machinery

• Wages