IB Business Management - 3.2 - Sources of Finance Quiz

Which of the following is a key advantage of using personal funds as a source of finance for sole traders?

• High interest rates

• Full control over decision-making

• Risk of losing personal savings

• Easy access to bank loans

Retained profit is best described as:

• The sale of unused company assets

• Profits reinvested into the business

• A loan provided by external investors

• Revenue from crowdfunding campaigns

What is the main drawback of using retained profit as a source of finance?

• It increases the company’s debt

• It reduces dividends to shareholders

• It requires external approval

• It is a short-term source of finance

Which of the following would not typically be sold as part of asset sales to raise finance?

• Unused machinery

• Company-owned vehicles

• Business shares

• Excess inventory

Why might a business prefer to sell assets instead of taking a loan?

• To avoid interest payments

• To strengthen long-term relationships with banks

• To increase retained profits

• To expand through external investments

Share capital refers to:

• Funds raised by selling company shares to investors

• Loans taken out from banks

• Retained earnings distributed as dividends

• Credit provided by suppliers

Which of the following is a disadvantage of share capital?

• High repayment costs

• Dilution of ownership

• Limited access for private companies

• High interest rates

Loan capital is most suitable for:

• Financing the day-to-day operations of a business

• Purchasing expensive non-current assets (fixed assets)

• Avoiding long-term liabilities

• Paying dividends to shareholders

Which type of external financing is most appropriate for short-term cash flow problems?

• Trade credit

• Share capital

• Business angels

• Retained profit

Crowdfunding is characterized by:

• Raising small amounts of money from a large number of people online

• High-interest loans from banks

• A long-term financing option for multinational corporations

• Financing that does not involve public investors