Understanding Sources of Finance

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

• It does not dilute ownership.

• It requires regular interest payments.

• It is only available for short-term needs.

• It involves high transaction costs.

Which of the following is a disadvantage of using net current assets as a source of finance?

• It can lead to liquidity problems.

• It increases the company's debt.

• It requires collateral.

• It involves high interest rates.

What is a short-term source of finance from the following options?

• Mortgages

• Trade credit

• Venture capital

• Owner’s capital

Which of the following is an external source of finance?

• Retained profit

• Sale of assets

• Peer to peer lending

• Net current assets

What is a disadvantage of using loans as a source of finance?

• It does not require repayment.

• It can dilute ownership.

• It involves interest payments.

• It is only available for long-term needs.

Which source of finance involves selling a company's invoices to a third party at a discount?

• Debt factoring

• Leasing

• Hire purchase

• Grants

What is an advantage of using owner’s capital as a source of finance?

• It requires regular interest payments.

• It does not require repayment.

• It increases the company's debt.

• It involves high transaction costs.

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

• Trade credit

• Invoice discounting

• Mortgages

• Net current assets

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

• It does not require repayment.

• It can dilute ownership.

• It involves high interest rates.

• It is only available for short-term needs.

Which source of finance involves borrowing money from a large number of people, typically via the internet?

• Crowd-funding

• Leasing

• Hire purchase

• Trade credit