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WorksheetsSources of Finance Quiz
Total questions: 25
Worksheet time: 14mins
Which of the following is a short-term source of finance?
Bank loan
Overdraft
Venture capital
Which of these is the correct definition of trade credit?
Trade credit is where a business can spend more money than it has in its bank account
Trade credit is money the business owners have invested through their own savings
Trade credit is an agreement with a supplier to pay bills at a later date
Which of these is a long-term source of finance?
Share capital
Trade credit
Overdraft
Which list identifies only long-term sources of finance?
Personal savings, loans and crowd funding
Overdrafts, retained profit and crowd funding
Trade credit, venture capital and share capital
What is the meaning of retained profit?
Profit paid to shareholders
Profit made by the business
Profit reinvested in the business
When would a business usually use a long-term source of finance?
To cover expansion costs
To cover running costs
To improve cash flow
Which of the following is a disadvantage of an overdraft?
Offers flexibility
Usually has a high interest rate
Interest is only paid on the amount used
Which source of finance leads to a dilution of ownership?
Personal savings
Share capital
Bank loan
Which of the following sources of finance incurs interest?
Share capital
Retained profit
Bank loan
Which of these is an advantage of crowdfunding to the business?
Crowdfunding allows people to invest small amounts, potentially increasing the chances of investment
Investors will need to be offered a return on their investment
You are guaranteed the amount of funding you need will be reached
Which of the following statements best describes an internal source of finance?
Finance generated from outside of the business
Finance generated from inside the business
Finance generated from retained profit only
Finance generated from a new share issue
Which of the following is classed as a short term source of finance?
Trade credit
Retained profit
New share issue
Government grant
Which of the following is an advantage to a business of using a government grant as a source of finance?
It does not need to be repaid
Businesses must meet specific conditions to qualify
It is relatively quick and easy to apply for one
The business will pay less tax on its profits
Which of the following is a reason why a new business start-up would need finance?
To fund expansion
To pay for replacement equipment
To carry out maintenance on a new piece of machinery
To pay a deposit for a premises
An established seasonal business is experiencing cash flow problems during the winter months. Which of the following would be a suitable source of finance to overcome this problem?
New share issue
Government grant
Overdraft
Hire purchase
Which of the following is an example of an external source of finance?
Sale and leaseback
Selling unwanted assets
New share issue
Retained profits
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
Which of the following is a disadvantage to a business of selling unwanted assets to raise business finance?
A business plan will need to be produced
The asset will no longer be available to use in the business
Interest will be payable on the amount raised
The bank will demand security
To which of the following businesses might a supplier be reluctant to issue trade credit?
A new business start-up
A successful franchise
A well-established and reputable outsourcing partner
A highly profitable public limited company
Which of the following is a key advantage to a business start-up of gaining funds from family and friends?
Flexible repayments
Repayments may need to be made quickly
Family and friends may not wish to review a business plan
Limited funds available
What is an advantage of an overdraft?
There is never interest
You can pay in smaller installments
Useful for relatively small sums and short term finance
You don't have to pay it back
What is an advantage of a business using owner's savings as a source of finance?
Very low rate of interest
It will bring new skills to the business
It doesn't need repaying
Repayment is always spread over a period time
Match the source of finance to the descriptions
money that is invested by the owner
Personal Savings
a facility that will allow you to withdraw more money from your account than is available
Bank Overdraft
It is a fixed amount of money that is given to a business by the bank that has to be repaid over time with interest, usually in monthly instalments
Bank Loan
a sum of money borrowed from the bank that is secured against a property and paid back in instalments, usually over a long period of time
Mortgage
usually awarded by the government or charitable organisations and are given to a business on the condition that they meet certain criteria
Grant
What is a characteristic of a bank loan?
Provided by family and friends
No interest charges
Does not need to be paid back
Paid back with interest over time
