Sources of Finance

What is a reason for a business to seek finance?

• Expansion

• To cover gambling losses

• To invest in an unrelated startup

• To pay for the owner's vacation

Why might e-commerce reduce the need for finance when establishing a business?

• It eliminates the need for a physical store

• It increases the cost of advertising

• It requires more employees than traditional retail

• It mandates higher taxes

What is the duration for paying back short-term finance?

• Within two years

• Within six months

• Within one year

• Over a period of time greater than one year

How is long-term finance defined in terms of repayment period?

• Paid back within six months

• Paid back within one year

• Paid back over a period of time greater than one year

• Paid back within two years

How can a business source money to fund itself?

• Only through internal sources

• Only through external sources

• Either through internal or external sources

• Neither through internal nor external sources

Where do internal sources of finance come from?

• From within the business

• From banks

• From financial institutions

• From external investors

Which of the following is NOT a way a business can internally finance its business?

• Retained profit

• Sale of assets

• Net current assets

• Issuing new shares

What is one of the advantages of using retained profits?

• Causes shareholder dissatisfaction

• Interest charges apply

• Available immediately

• Amount available may be limited

Which of the following is a disadvantage of using retained profits?

• No loss of ownership

• Avoids debt

• Could cause shareholder dissatisfaction as dividend payment would be reduced

• No interest charges

What does reinvesting retained profits into the business avoid?

• Shareholder satisfaction

• Loss of ownership

• Debt

• Limited availability of funds