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Financing a Business - Test

Total questions: 38

Worksheet time: 19mins

Name
Class
Date
1.

What is the primary purpose of financing a business?

a)

To maximize profits

b)

To minimize expenses

c)

To obtain necessary funds for operations and growth

d)

To secure a competitive advantage

2.

Financing a business is primarily done to ______.

a)

maximize profits

b)

minimize expenses

c)

obtain necessary funds for operations and growth

d)

secure a competitive advantage

3.

The process of funding a new business or venture by a large number of investors over the internet is called:

a)

Angel investors

b)

Crowdfunding

c)

Peer-to-peer lending

d)

Venture capital

4.

Websites like Kickstarter.com and GoFundMe.com bring together investors and borrowers that both can benefit financially. These would be examples of:

a)

Commercial loans

b)

Crowdfunding

c)

Peer-to-peer lending

d)

Venture capital firms

5.

Websites like Kickstarter.com and GoFundMe.com are examples of ________, which bring together investors and borrowers.

a)

Commercial loans

b)

Crowdfunding

c)

Peer-to-peer lending

d)

Venture capital firms

6.

In addition to the financial support, one of the benefits of being funded by a venture capital firm is that it comes with:

a)

Full control of the business

b)

Guidance and advice

c)

Lines of credit

d)

The freedom to make decisions

7.

Which of the following is NOT a source of short-term funding for a business?

a)

Commercial paper

b)

Factoring

c)

Selling newly issued stock

d)

Trade credit

8.

Jasmine decided to sell her accounts receivable at a discount to another company. This process is known as ______.

a)

Factoring

b)

Retained earnings

c)

Short-term bank loans

d)

Trade credit

9.

Ben’s Hardware Store receives most of its goods from suppliers without requiring payment at the time of delivery, essentially being able to “buy now, pay later.” This type of financing is called:

a)

Factoring

b)

Retained earnings

c)

Short-term bank loans

d)

Trade credit

10.

In order to avoid negotiating a separate loan each time they need more funds, many companies work out arrangements with their bankers to obtain pre-approval so that they can draw on funds as needed. An example of this would be using:

a)

A factor

b)

A line of credit

c)

A trade credit

d)

Retained earnings

11.

Any profits that are earned and reinvested into a company are called:

a)

Debt financing

b)

Line of credits

c)

Retained earnings

d)

Revolving credits

12.

Fill in the blank: The process of reinvesting profits back into a company is known as ______.

a)

Debt financing

b)

Line of credits

c)

Retained earnings

d)

Revolving credits

13.

Short-term promissory notes issued by large corporations to finance their business are called:

a)

Commercial paper

b)

Covenants

c)

Factors

d)

Short-term bank loans

14.

Raising funds for a company by issuing bonds or borrowing from banks are examples of:

a)

Debt financing

b)

Equity financing

c)

Retained earnings

d)

Trade credit

15.

Which of the following is NOT an example of long-term financing for a business?

a)

Debt financing

b)

Equity financing

c)

Retained earnings

d)

Trade credit

16.

Fill in the blank: _______ is a form of financing where a company uses its profits to reinvest in the business rather than distributing them to shareholders.

a)

Debt financing

b)

Equity financing

c)

Retained earnings

d)

Trade credit

17.

Selling newly issued stock is an example of:

a)

Commercial paper

b)

Debt financing

c)

Equity financing

d)

Retained earnings

18.

A measurement of a company's health and indicates the extent to which a company relies on debt financing is called:

a)

Capital structure

b)

Debt financing

c)

Debt-to-asset ratio

d)

Equity financing

19.

Fill in the blank: The extent to which a company relies on debt financing is measured by the ______.

a)

Capital structure

b)

Debt financing

c)

Debt-to-asset ratio

d)

Equity financing

20.

One of the benefits of using equity financing is:

a)

The agreements to covenants

b)

The opportunity to use financial leverage

c)

The tax benefits

d)

Repayment is not required

21.

One of the downsides of using debt financing is:

a)

The agreements to covenants

b)

Ability to grow the business

c)

The tax benefits

d)

Repayment is not required

22.

All of the following are components of a budget except:

a)

Current assets

b)

Revenue Projection

c)

Operating Expenses

d)

Contingency Fund

23.

Cash and other assets that can be converted into cash within the next year are called:

a)

Current assets

b)

Debt financing

c)

Equity financing

d)

Retained earnings

24.

Fill in the blank: Accounts receivable and inventory are examples of ______.

a)

Cash and cash equivalents

b)

Current assets

c)

Equity financing

d)

Retained earnings

25.

All of the following are considered long term assets except:

a)

Land

b)

Accounts Receivable

c)

Buildings

d)

Machinery

26.

Requirements that a business agrees to when borrowing money are called:

a)

Refusal

b)

Covenants

c)

Rejection

d)

Disclaimer

27.

A way for a company to raise capital by selling shares of the company in exchange for cash

a)

Equity Financing

b)

Debt Financing

c)

Trade Credit

d)

Commercial Paper

28.

Which type of financing is needed to pay for the current operating activities of a business (1-2 months-a year)?

a)

start-up financing

b)

short-term financing

c)

long-term financing

29.

The amount of money needed to open the business.

a)

improvement

b)

innovation

c)

start-up financing

d)

crowdfunding

30.

Jeff and Ahmedin are partners in a tech startup. They are considering taking out a bank loan to expand their business. This approach is known as...

a)

equity financing

b)

bootstrapping

c)

debt financing

d)

preferred stock

31.

___ is money provided by large investors to finance new products and new business that have a good chance of being profitable.

a)

Venture capital

b)

Loans

c)

Capital

d)

Investments

32.

Which type of financing is needed to pay for the current operating activities of a business (1-2 months-a year)?

a)

start-up financing

b)

short-term financing

c)

long-term financing

33.

Retained earnings are often used for:

a)

Paying off long-term debt.

b)

Distributing dividends to shareholders.

c)

Financing new projects and expansion.

d)

Buying back company shares.

34.

What is a primary advantage of debt financing?

a)

It does not require repayment.

b)

Interest payments are tax-deductible.

c)

It dilutes ownership of the company.

d)

It is not subject to interest rate fluctuations.

35.

Expenses encompass the day-to-day costs of running a business

a)

Operating Expenses

b)

Debt Service

c)

Contingency Fund

d)

Revenue Projection

36.

Involves estimating the income a business anticipates generating from its various sources, including sales, services, and any other revenue streams. 


a)

Operating Expenses

b)

Revenue Projection

c)

Contingency Fund

d)

Capital Expenditures

37.

 Capital Expenditures


Investments in assets that enhance a company's capabilities and operations include all of the following except:

a)

Machinery

b)

Equipment

c)

Technology

d)

Salaries

38.

The three main components of the balance sheet are:

a)

Profit, Income, Taxes

b)

Crowdfunding, Venture, Investors

c)

Assets, Liabilities, Shareholder's Equity

d)

Income, Revenue, Profit