2.1.2 External Finance

What is the typical investment range for business angels?

• £1,000 to £5,000

• £10,000 to £100,000+

• £500,000 to £1,000,000

• £5,000 to £10,000

What is a reason businesses might seek external finance?

• To avoid taxes

• To expand operations

• To reduce profits

• To decrease liabilities

What is a method of finance that involves leasing?

• Venture capital

• Trade credit

• Overdrafts

• Leasing

What is a benefit of using business angels for finance?

• No risk involved

• Access to expertise

• Guaranteed profits

• Low interest rates

What is a method of finance that involves no banks?

• Bank loans

• Government grants

• Crowd funding

• Corporate bonds

What is the significance of authorised share capital?

• It is the minimum amount shareholders want to raise

• It is the maximum amount shareholders want to raise

• It is the amount of money borrowed from banks

• It is the amount of money invested by venture capitalists

Bank overdrafts are flexible. What does this mean?

• They have a fixed repayment schedule

• They can be adjusted to meet the business's needs

• They are only available for short-term use

• They require collateral

What is the main advantage of an unsecured bank loan for a business, when raising finance?

• No interest is charged

• No collateral is required

• It is available for a longer term

• It has a lower interest rate

What is meant by a capital gain?

• Profit from selling an asset at a higher price than purchase

• Interest earned on a savings account

• Dividends received from shares

• Income from rental properties

State two advantages of leasing as a method of finance.

• Ownership of the asset

• No large sums needed upfront and access to up-to-date equipment

• Long-term cost savings

• Increased asset value