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WorksheetsFinancing for Small Business
Total questions: 11
Worksheet time: 6mins
Internal sources of finance are
provided by parents
provided from within the business
provided by the bank
provided from outside the business
External sources of finance could include:
trade credit
leasing
term loans
bank overdraft
all of the above
Advantages of capital contribution include
no interest
limited to personal resources
No fixed payments
both a & b
both a & c
Term loans disadvantages do not include
can be designed for the needs of a business
fixed payments must be budgeted
involves a commitment for an extended period of time
security may be required
Leasing does not mean
the the business avoids large cash outlay
The business owns the asset
the assets can be updated every couple of years
Bank overdraft is
Available for all business
classified as a current liability
free from interest
ongoing for a business
Flat rate of interest is
applied to the principal amount over the borrowed fixed term
based on the current amount owed
no interest is charged
When using reducing balance interest formula
The interest rate remains consistent
The interest reduces as the amount of the loan reduces
The interest is payable each year
no interest is charged
Credit Checks are required because
They show the history of the businesses ability to pay back loans
Show if a business has been in financial debt in the past
provide a business with a credit rating
all of the above
Debt ratio is calculated by
comparing current assets and current liabilities
seeing how much a business owes
the owners investment in the business
comparing total liabilities with total assets
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