3.2 - Sources of Finance

Which of the following is an internal source of finance?

• Bank loan

• Share capital

• Retained profit

• Trade credit

Which source of finance is typically used by start-ups and small businesses where individuals provide small investments?

• Leasing

• Crowdfunding

• Trade credit

• Overdraft

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

• It does not require repayment

• It can limit dividends to shareholders

• It increases a company’s debt

• It requires external approval

Which external source of finance involves raising money through selling shares in the company?

• Overdraft

• Trade credit

• Share capital

• Microfinance

A business needs to purchase new machinery but wants to avoid large upfront costs. Which financing option is most appropriate?

• Leasing

• Trade credit

• Overdraft

• Sale of assets

What is a major advantage of using loan capital as a source of finance?

• It does not require repayment

• It allows ownership to remain unchanged

• It is interest-free

• It is not available for long-term financing

Which of the following is NOT an external source of finance?

• Overdraft

• Retained profit

• Microfinance

• Business angels

What is the main function of business angels in financing?

• Providing long-term loans

• Offering small loans to individuals

• Investing their own money into start-ups

• Extending trade credit to businesses

Which of the following sources of finance is typically short-term?

• Share capital

• Mortgage

• Overdraft

• Retained profit

How does leasing benefit businesses?

• It helps businesses avoid large upfront costs

• It reduces monthly payments compared to ownership

• It does not involve any legal agreements

• It provides ownership of the asset at the start