External Sources of Finance Quiz

Amelia is starting a new business and needs funding. What is an external source of finance?

• Revenue generated by sales

• Capital found from within a business

• Capital found from outside a business

• Money saved by the business

Ava is considering taking a loan to start her new business. What is a disadvantage of loan capital?

• It is a quick process

• No interest is applied

• Interest is applied, making it expensive

• No collateral is required

Amelia is considering investing in a company. What is an advantage of share capital?

• It is only available to public companies

• Interest is applied

• It has to be repaid

• No interest is applied

Lily is considering taking her company public. What is a disadvantage of stock market flotation?

• The business records remain private

• Only a small amount of capital can be raised

• It is inexpensive

• It can be complicated and expensive

Emily wants to buy a car and approaches a bank for a loan. What is collateral in the context of this loan?

• A form of share capital

• Security provided against repayment of a loan

• A type of interest

• A government grant

William and Priya have invested in a business with share capital. What happens to the profits in such a business?

• They are reinvested into the business

• They are kept as reserves

• They are paid to shareholders as dividends

• They are used to repay loans

Rohan is considering taking a loan to expand his small business. Which of the following is a feature of loan capital?

• Regular repayments are made over time

• It is only available to large businesses

• It is interest-free

• It does not require regular repayments

Arjun is considering taking his company public. What is a potential risk of stock market flotation?

• The business gains too much control

• Investors may buy shares for quick profit

• The business becomes a private limited company

• The share price never increases

Kiara is considering taking her company public. What is an advantage of stock market flotation?

• It is only available to private companies

• It raises small amounts of capital

• Shares have to be repaid

• The business gains recognition

When Eesha and Alexander decided to expand their business by issuing share capital, what was a disadvantage they faced?

• It requires high interest payments

• Control of the business gets diluted

• Profits are not shared

• The business retains full control