SOF - KC - IG CIE BUS - 0450

Which of the following is an example of internal finance for a limited company?

• Selling Shares

• Selling Debentures

• Obtaining a Loan

• Reducing Stock Levels

Which of the following is an example of external finance for a limited company?

• retained profits of the company

• selling shares

• sale of assets no longer used in the business

• reducing stocks

An advantage that an overdraft has over a bank loan is that:

• it has a fixed rate of interest

• it is paid back over a fixed time period

• no dividends have to be paid to shareholders as with a loan

• the size of the overdraft can vary with the needs of the business

An advantage that share capital (equity capital) has over long-term loans is that:

• the capital never has to be repaid

• the rate of interest on shares is fixed

• the balance of control in the business will change

• dividends are paid before tax

Which of the following is the best definition of a rights issue of shares?

• Banks have the right to buy these if they have lent money to the business.

• Existing shareholders have the right to buy these.

• New shareholders have the right to buy these.

• The company selling the shares has the right to buy them.

An advantage to a business of leasing computers rather than buying them outright is that:

• the loan never has to be repaid

• the computers will never go out of date

• the total cost of leasing is usually cheaper than buying the computers

• the company does not have to find a large cash sum to buy the computers

Which of the following business decisions is likely to need long-term finance?

• increasing stocks of goods for the summer season

• hiring a car for the sales manager

• building a new factory

• paying creditors for goods supplied

A flower seller plans to increase stocks of plants before a major festival. Which of the following is the most likely source of finance?

• bank overdraft

• leasing

• share issue

• debentures

Which of the following sources of finance is most likely to be used by a company planning to take over another business?

• bank overdraft

• leasing

• share issue

• trade credit

Which of the following is a permanent source of finance for a company?

• long-term bank loan

• share capital

• creditors

• overdraft