BTEC Business Unit 3 LO:D Sources of finance

Which of the following is an example of an internal source of finance?

• Loans

• Sale of assets

• Mortgages

• Venture capital

What is a key advantage of using retained profit as a source of finance?

• No interest is payable

• It reduces the company’s asset base

• It increases liabilities

• It dilutes ownership

Which of the following is a disadvantage of using retained profit?

• It increases the company’s debt

• It cannot be used for reinvestment

• It may limit dividend payments to shareholders

• It increases interest expenses

What does net current assets refer to in business finance?

• The difference between current assets and current liabilities

• The total assets of a company

• The equity of the business

• The amount of cash in the business

A disadvantage of selling assets as a source of finance is that it:

• Increases the interest expense

• Reduces the number of operational assets

• Dilutes the control of ownership

• Increases the company’s revenue

What is a key characteristic of owner’s capital as a source of finance?

• It does not require repayment

• It is limited to short-term projects

• It requires a high level of interest

• It is only available to large companies

Which of the following is an advantage of taking out a loan?

• There are no monthly repayments

• The business retains ownership

• It doesn’t affect credit history

• It requires no collateral

Crowd-funding is best described as:

• A short-term loan from a bank

• A platform for businesses to raise small amounts of money from many people

• A government grant for new businesses

• A long-term finance option offered by venture capitalists

What is a key disadvantage of using venture capital as a source of finance?

• High interest rates

• Loss of some control and ownership

• Limited repayment periods

• Dilution of share value

Which source of finance involves selling outstanding invoices to a third party?

• Leasing

• Debt factoring

• Trade credit

• Hire purchase