WorksheetsTopic 1-3 A01
Total questions: 25
Worksheet time: 13mins
Why do you need a business plan?
To explain your idea
To gain financing
it's a road map that sets objectives and goals so they can be reviewed to set new targets
To help reduce the risk of business failure
All of the above
The main problem for setting up as a sole trader is:
Can't employ people to help in the business
Unlimited liability
Higher taxes on profits earned
Not able to sell shares to the public
One of these statements is true. Which one?
A sole trader has no share capital
A partnership can be formed to have limited liability
A sole trader cannot be a service business
A partnership can have just 1 partner
An advantage of using debt finance to help a business grow is that:
The debt won't need to be repaid for 5 years
Interest costs will be low
There is no loss of shareholder control
A growing business will always need more debt
A downside of issuing shares to new investors is....
Loss of some control
Dividends don't need to be paid
The amount is treated as debt
Cash flow worsens
A key difference between a bank loan and an overdraft is that a bank loan....
Is treated as owners capital
Has fixed repayment and interest
Is suitable for short-term cash flow needs
Does not have to be repaid
A bank loan will usually involve all of the following except...
Payment of dividends out of retained profits
Security provided to the bank
Interest charged on the outstanding amount
Periodic payments of the loan over its term
A significant benefit of using retained profit as a source of finance is...
Lower liquidity
Higher cost
Flexibility
Higher working capital
Leasing would be the most appropriate way to finance the purchase of:
Advertising
Raw Materials
Inventories
Machinery & Equipment
Which of these would increase the amount of capital invested in a business?
Credit given by suppliers
Payment of dividend
Issue of new shares
Receipt of government grant
What is Trade Credit?
The amount owed to customers
Money owed by suppliers
Amounts owed to a supplier of goods and services
The overall reputation of a business
Which of the following is an internal source of finance?
Leasing
Trade Credit
Bank Overdraft
Retained Profit
A cash flow benefit of trade credit is that...
Payments must be made on time
There is a loss of business ownership
Suppliers will require dividends
Interest is not normally charged
Which of these is a short term source of finance?
Share Capital
Mortgage
Loan
Overdraft
A bank overdraft is most suitable for financing...
Issue of shares
Short-term finance needs
Expansion into Europe
Investment in new buildings
What is working capital?
The finance needed to make fixed assets work
The finance needed before trading commences
The finance a business needs for its day-to-day activities
The long-term finance needs of the business
An advantage of a startup business obtaining finance from a business angel is that the startup..
is likely to gain from the expertise of the angel
can avoid using a bank overdraft
will not need to pay tax on its profits
can ask for extra angel finance whenever needed
A benefit of raising finance from family and friends is that..
it will not need to be repaid
there are no personal issues involved
it can often be arranged at short notice
it is the best way of raising large amounts
Which one the these statements about venture capital is correct. Venture Capital..
is a short-term source of finance
is suitable for low-risk startups
is generally invested in higher-risk firms
is a form of government grant
Which of the following types of business organisation is not unincorporated?
Limited company
Sole Trader
Partnership
Charity
What is meant by limited liability?
Shareholders are limited in the dividends they can be paid
Shareholders have limited control over the business decisions
Shareholders only liable for the amount they invested
Shareholders can sue the business
What kind of tax does a sole trader pay on the profits earned by the business?
Value Added tax
Corporation tax
Income Tax
National Insurance
Which one of the statements is true about a limited company?
A limited company pays income tax on its profits
Profits can be retained rather than paid as dividends
A shareholder cannot be a company director
Companies must have at least 3 directors
An advantage of setting up as a limited company compared with as a partnership is that..
The firm remains in existence after a change in ownership
The firm's shareholders have unlimited liability
The firm will enjoy quicker and better decision-making
The firm will be able to obtain bank finance
Which is true about a PLC?
The general public may invest in any PLC
A PLC must have a minimum share capital of £150,000
A PLC doesn't have to offer its shares on a stock exchange
Shareholders in a PLC do not have limited liability
