Business Finance Quiz

What is the primary purpose of business finance?

• To acquire fixed assets
• To manage day-to-day expenses
• To raise capital for the business
• All of the above

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

• Shares and debentures
• Trade credit
• Bank overdraft
• Commercial paper

What is the key difference between owner's funds and borrowed funds?

• Owner's funds do not require repayment, borrowed funds do
• Owner's funds have voting rights, borrowed funds do not
• Owner's funds have a fixed rate of return, borrowed funds do not
• Borrowed funds have a fixed time period, owner's funds do not

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

• Shares
• Debentures
• Retained earnings
• Bank loans

What is the primary advantage of financing through retained earnings?

• No cost of capital
• Tax deductibility
• Increased control for shareholders
• No dilution of ownership

Which feature of trade credit makes it a flexible source of finance?

• No interest charged
• No security required
• No formal application process
• Readily available

What is the key benefit of financing through public deposits?

• Lower cost than borrowing
• Greater control for depositors
• Easier than raising equity
• No restrictions on usage

Which feature of debentures makes them a less risky source of finance than equity?

• Fixed rate of interest
• No voting rights
• Charge on company assets
• Repayable at maturity

What is the main advantage that financial institutions provide to borrowing companies?

• Long-term financing
• Managerial advice
• Higher credit rating
• Underwriting services

Which feature of inter-corporate deposits makes them a quick source of short-term finance?

• High interest rates
• Minimal legal formalities
• Flexible repayment terms
• Availability of collateral