Sources of Finance Quiz

What is a disadvantage of using owner's capital as a source of finance?

• The owner might not have enough savings

• Doesn't require borrowing money

• Quick and convenient

• No interest payments to make

Which of the following is an advantage of retained profits?

• Requires borrowing money

• It is not available for future problems

• Easy access to the money

• Interest payments are required

What is a disadvantage of selling assets?

• Can create space for more profitable uses

• Might not get the full market value

• Raise money from unused equipment

• Can be quick

What is an advantage of borrowing from family and friends?

• High interest rates

• Money may not need to be paid back

• Arguments may occur

• Money is always paid back

What is a disadvantage of a bank loan?

• Difficult for a new business to access

• Easy and quick to access

• No interest payments

• No significant amount of money at one time

What is an advantage of an overdraft?

• High interest rates

• Quick access

• Long-term solution

• No emergency purchases allowed

What is a disadvantage of venture capitalists and business angels?

• Potential to raise huge amount of money

• They may offer advice and help

• Owner must give away part of the business

• Gain money quickly

What is an advantage of issuing shares?

• Shareholders receive dividends

• Give away part of the business

• Leaves a business open to takeovers

• Can gain lots of money quickly

What is a disadvantage of trade credit?

• Access to supplies without immediate payment

• No interest

• Large amounts available

• Short term, must be paid off quickly

What is an advantage of government grants?

• Needs to be paid back

• Available to small businesses

• Quick and easy application process

• No criteria to meet