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WorksheetsIB Business Management - 3.2 - Sources of Finance Quiz
Total questions: 40
Worksheet time: 20mins
Which of the following is a key advantage of using personal funds as a source of finance for sole traders?
High interest rates
Full control over decision-making
Risk of losing personal savings
Easy access to bank loans
Retained profit is best described as:
The sale of unused company assets
Profits reinvested into the business
A loan provided by external investors
Revenue from crowdfunding campaigns
What is the main drawback of using retained profit as a source of finance?
It increases the company’s debt
It reduces dividends to shareholders
It requires external approval
It is a short-term source of finance
Which of the following would not typically be sold as part of asset sales to raise finance?
Unused machinery
Company-owned vehicles
Business shares
Excess inventory
Why might a business prefer to sell assets instead of taking a loan?
To avoid interest payments
To strengthen long-term relationships with banks
To increase retained profits
To expand through external investments
Share capital refers to:
Funds raised by selling company shares to investors
Loans taken out from banks
Retained earnings distributed as dividends
Credit provided by suppliers
Which of the following is a disadvantage of share capital?
High repayment costs
Dilution of ownership
Limited access for private companies
High interest rates
Loan capital is most suitable for:
Financing the day-to-day operations of a business
Purchasing expensive non-current assets (fixed assets)
Avoiding long-term liabilities
Paying dividends to shareholders
Which type of external financing is most appropriate for short-term cash flow problems?
Trade credit
Share capital
Business angels
Retained profit
Crowdfunding is characterized by:
Raising small amounts of money from a large number of people online
High-interest loans from banks
A long-term financing option for multinational corporations
Financing that does not involve public investors
What is a key advantage of leasing over purchasing assets outright?
Lower total costs over time
Ownership of the asset
Reduced upfront financial burden
Higher flexibility in using the asset
Microfinance providers are best suited for:
Large multinational corporations
Small businesses in developing economies
Public limited companies
Startups in developed economies
Which external financing method involves an individual investor providing capital in exchange for equity in the business?
Business angels
Trade credit
Overdrafts
Crowdfunding
What is the primary advantage of overdrafts for businesses?
Long-term capital availability
Easy access to funds during emergencies
No interest charges
Large loan amounts
Trade credit refers to:
Borrowing funds from a bank
Purchasing goods and services on account
Selling unused inventory to raise capital
Financing small projects through community donations
Which source of finance is least appropriate for a business looking to purchase new machinery?
Leasing
Share capital
Overdrafts
Loan capital
A small business in a developing country needs $200 to purchase tools. The most appropriate source of finance is:
Share capital
Microfinance
Loan capital
Retained profit
For a business needing immediate working capital, the best option would be:
Retained profit
Trade credit
Sale of assets
Share capital
A sole trader needing short-term working capital would most likely use:
Personal funds
Overdrafts
Sale of assets
Share capital
Crowdfunding is most suitable for businesses that:
Have access to large amounts of retained profit
Need short-term cash flow assistance
Have innovative ideas appealing to the public
Operate as multinational corporations
When comparing short-term versus long-term finance, a key disadvantage of short-term finance is:
Lower flexibility in repayment
Higher costs in the long term
Limited use for purchasing fixed assets
Reduced access to external investors
Which financing option is most appropriate for a large, well-established public company aiming to expand operations globally?
Business angels
Share capital
Microfinance providers
Trade credit
Leasing is generally more appropriate than purchasing when:
The business prefers long-term ownership
The asset has a short useful life
Upfront capital is not an issue
The asset appreciates in value over time
Which of the following scenarios would make trade credit inappropriate?
A startup with no retained profit
A company with poor supplier relationships
A large multinational company
A small company experiencing cash flow problems
Why might a startup prefer business angels over loan capital?
Business angels provide ongoing mentorship
Loan capital has lower interest rates
Business angels have no ownership requirements
Loan capital involves significant equity dilution
Which source of finance involves giving up a portion of ownership in the business?
Retained profit
Share capital
Trade credit
Overdrafts
A business chooses to lease rather than purchase a new vehicle. This is an example of:
Internal finance
External finance
Retained profit usage
Trade credit
Which of the following is not a benefit of retained profit?
No repayment obligations
No interest costs
No dilution of ownership
No risk of opportunity costs
Which external source of finance is best suited for a high-risk, innovative startup?
Business angels
Loan capital
Trade credit
Overdrafts
Selling assets is most appropriate when:
The business needs immediate cash
Expanding into new markets
Funding long-term projects
Avoiding interest payments on loans
Overdrafts are generally:
Long-term financing options
Provided by microfinance providers
A short-term solution for cash flow problems
Used for large capital purchases
Crowdfunding is particularly beneficial for:
Companies in need of long-term loans
Businesses with community-focused projects
Sole traders using personal funds
Public limited companies seeking expansion
Leasing allows businesses to:
Avoid ownership responsibilities
Pay off long-term debts
Reduce equity dilution
Eliminate supplier credit agreements
Microfinance providers differ from traditional banks because they:
Target large corporations exclusively
Charge extremely high interest rates
Focus on small-scale entrepreneurs
Require significant collateral
Trade credit can be risky if:
A supplier extends payment deadlines
The business fails to pay on time
Credit is interest-free
Suppliers offer bulk discounts
A company wanting to finance long-term expansion plans should avoid:
Retained profit
Loan capital
Overdrafts
Share capital
Which source of finance typically requires strong relationships with suppliers?
Trade credit
Crowdfunding
Loan capital
Share capital
Business angels are most likely to invest in:
Public limited companies
Risky but innovative startups
Businesses using retained profits
Multinational corporations
Which type of finance ensures no ownership dilution but increases liabilities?
Loan capital
Share capital
Crowdfunding
Trade credit
Overdrafts are best used for:
Financing large capital purchases
Covering unexpected short-term cash needs
Expanding into new markets
Funding long-term projects
