Business Finance MCQ Quiz

Why does a business require finance when starting up?

• To pay dividends

• To hire staff

• To purchase essential capital equipment

• To reduce profits

Which of the following is an example of capital expenditure?

• Salaries

• Purchase of raw materials

• Office rent

• Purchase of machinery

What does working capital represent?

• Total assets minus liabilities

• Current assets minus current liabilities

• Revenue minus expenditure

• Long-term loans

A firm with insufficient working capital may become:

• Solvent

• Profitable

• Illiquid

• Highly geared

Internal sources of finance do NOT include:

• Retained profits

• Sale of assets

• Trade credit

• Reduction in working capital

Which of the following is a short-term source of finance?

• Leasing

• Bank overdraft

• Debentures

• Share issue

An example of a medium-term finance source is:

• Trade credit

• Bank loan for 2 years

• Issue of shares

• Retained profit

What is the key feature of leasing?

• Ownership of asset

• Fixed interest

• Periodic payments without ownership

• Issuance of shares

A major disadvantage of using retained profit is:

• High interest cost

• Reduction of business ownership

• Not available to new businesses

• Increase in debt

Which external source of finance helps avoid bad debts?

• Leasing

• Factoring of debts

• Share issue

• Bank loan