WorksheetsBTEC Business Unit 3 LO:D Sources of finance
Total questions: 20
Worksheet time: 10mins
Which of the following is an example of an internal source of finance?
Loans
Sale of assets
Mortgages
Venture capital
What is a key advantage of using retained profit as a source of finance?
No interest is payable
It reduces the company’s asset base
It increases liabilities
It dilutes ownership
Which of the following is a disadvantage of using retained profit?
It increases the company’s debt
It cannot be used for reinvestment
It may limit dividend payments to shareholders
It increases interest expenses
What does net current assets refer to in business finance?
The difference between current assets and current liabilities
The total assets of a company
The equity of the business
The amount of cash in the business
A disadvantage of selling assets as a source of finance is that it:
Increases the interest expense
Reduces the number of operational assets
Dilutes the control of ownership
Increases the company’s revenue
What is a key characteristic of owner’s capital as a source of finance?
It does not require repayment
It is limited to short-term projects
It requires a high level of interest
It is only available to large companies
Which of the following is an advantage of taking out a loan?
There are no monthly repayments
The business retains ownership
It doesn’t affect credit history
It requires no collateral
Crowd-funding is best described as:
A short-term loan from a bank
A platform for businesses to raise small amounts of money from many people
A government grant for new businesses
A long-term finance option offered by venture capitalists
What is a key disadvantage of using venture capital as a source of finance?
High interest rates
Loss of some control and ownership
Limited repayment periods
Dilution of share value
Which source of finance involves selling outstanding invoices to a third party?
Leasing
Debt factoring
Trade credit
Hire purchase
Which of the following is a long-term source of finance?
Trade credit
Owner’s capital
Mortgages
Grants
One key disadvantage of using hire purchase as a finance method is:
The business does not own the asset until the final payment is made
It is interest-free
It is available only for long-term use
The asset is returned after the payment period
What is a benefit of using trade credit as a source of finance?
Immediate payment is required
It allows a business to purchase goods and pay for them at a later date
Interest rates are very high
It involves selling company shares
What distinguishes leasing from purchasing an asset?
The business owns the asset from the start
The business rents the asset and never owns it
Leasing involves high upfront costs
Leasing assets depreciate faster
Which of the following is an advantage of using grants as a source of finance?
They must be repaid with interest
They are usually interest-free and do not need to be repaid
They require a high credit score
They are limited to long-term projects
Which of the following is a disadvantage of peer-to-peer lending?
It involves high transaction fees
It can be expensive compared to traditional loans
It offers low interest rates to lenders
It does not require collateral
Invoice discounting is used to:
Reduce the interest on a loan
Reduce the value of outstanding invoices to access cash more quickly
Purchase assets at a discounted price
Access venture capital funding
A key disadvantage of using donations as a source of finance is:
They require repayment with interest
They may not be sufficient for business expansion
They dilute the ownership of the business
They increase liabilities
What is a major advantage of using peer-to-peer lending?
It eliminates the need for any collateral
It requires a third-party bank for transactions
It offers no flexibility in terms of repayment
It offers low interest rates for both lenders and borrowers
What is a potential downside of using invoice discounting?
It involves selling business equity
It can impact relationships with customers if they are aware of the arrangement
It requires high levels of retained profit
It results in long-term debt for the business
