Sources of Finance - Lesson Quiz

Why is it important for a business to know the different sources of finance available?

• To choose the most suitable option for their needs

• To increase their product range

• To improve their marketing campaigns

• To hire more employees

What is one challenge businesses face in managing finance?

• Keeping control of finance so costs don’t spiral out of control

• Deciding on the company logo

• Choosing office furniture

• Selecting a business name

Which of the following is an example of an internal source of finance for a start-up business?

• Bank loan

• Venture capital

• Founder finance

• Government grant

What is meant by "retained profits" as a source of finance for a new business?

• Money borrowed from a bank

• Profit from another business the entrepreneur owns

• Money given by the government

• Funds raised by selling shares

What is a key characteristic of a bank overdraft as a source of finance for businesses?

• It is a long-term loan

• It is used to maintain stable cash flow in the short-term

• It does not require repayment

• It is only available to large corporations

Which of the following best describes a benefit of using retained profits as a source of finance?

• It is inflexible and controlled by external lenders

• It is very flexible and management can control how it is reinvested

• It always requires government approval

• It must be repaid with interest

What does high profits and cash flows suggest about a business’s ability to take on debt?

• The business could afford some debt.

• The business should avoid all debt.

• The business must reduce its cash flow.

• The business should pay higher dividends.

Which of the following is an example of an internal source of finance for an established business?

• Asset disposals

• Bank loans

• Government grants

• Crowdfunding

What is a potential drawback of relying on asset disposals as a source of finance for a business?

• Not all businesses will have spare assets to sell

• It always leads to long-term financial stability

• It increases the number of assets owned by the business

• It guarantees regular income

What is a "share issue" in the context of business finance?

• When a business issues new shares for purchase to raise cash

• When a business takes a loan from a bank

• When a business sells its assets

• When a business merges with another company