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WorksheetsSources of Finance
Total questions: 17
Worksheet time: 8mins
Which of the following is an internal source of finance?
Trade credit
Leasing
Retained profit
Overdraft
A key difference between a bank loan and an overdraft is that a loan...
Does not have to be repaid
Has fixed repayment and interest
Is suitable for short-term cash flow needs
Is treated as owners capital
A downside to issuing shares to new investors is....
The amount is treated as debt
Dividends don't need to be paid
Cash flow worsens
Loss of some control
A long-term loan to buy property is known as a
Lease
Savings account
Mortgage
Overdraft
Which of these sources of finance is likely to require security in order to be obtained?
Loan
Government grant
Share capital
Sale of assets
The issue of shares for the first time on the stock exchange is a
Dividend
Equity withdrawal
Rights issue
Flotation
Raising funds from a wide variety of small investors by publicising an idea on the internet is called:
Share capital
Venture capital
Crowdfunding
Trade credit
Which of the following is an advantage to an entrepreneur of using venture capital to secure finance for a business start-up?
100% of profits are always retained by the entrepreneur
Large amounts of finance are usually available
Control is never lost within the business
The venture capitalist funds will never need repaying
Which of the following is an advantage to a start-up business of using an overdraft?
Guaranteed funds from the bank for every start-up
Interest rates will always stay the same increasing business certainty
It provides flexibility to a business when it is short of cash
It will never be recalled at very short notice
Which of the following is a drawback to a sole trader of becoming a private limited company in order to raise finance for expansion?
The amount generated will need to be repaid
A dividend must always be paid each year to the shareholders
Interest will need to be paid on the amount raised
The process to change the type of ownership is time consuming
A successful sole trader wants to raise funds to open a second restaurant and is eager to retain full control of the business. Which of the following sources of finance would be the most appropriate to fund this expansion?
Gain a partner
Arrange an overdraft facility
Obtain a bank loan
Issue new shares
To which of the following businesses might a supplier be reluctant to issue trade credit?
A new business start-up
A successful franchise
An established and thriving partnership
A highly profitable and reputable private limited company
Which of the following is a benefit to a private limited company of using retained profit to finance its growth?
The business will not be required to pay dividends to its shareholders
The business will pay less tax on its profits
The amount will not need to be paid back
The amount available will always match fully the company’s requirements
An established seasonal partnership is experiencing cash flow problems during the winter months. Which of the following would be a suitable source of finance to overcome this problem?
Share capital
Overdraft
Bank loan
Debenture
Which one of the following correctly defines insolvency?
where the value of items owned is greater than the value of money owed
where costs exceed the total revenue
where the value of inputs is greater than the value of outputs
where debts are unable to be met when they are due to be paid
Which two of the following statements about using trade credit as a source of finance are true?
it may deny a business any discounts available for paying promptly
it dilutes ownership and control of the business
it negatively affects cash flow
it is interest free – as long as the business pays within the time-frame specified
A business pays annual interest of $412.50 on a bank loan of $5 500. Which one of the following is the annual interest the business pays as a percentage of the amount borrowed?
0.075 %
0.75 %
7.5 %
75 %
