Finance Quiz

What is a benefit of using retained profit as a source of finance?

• No interest needs to be paid

• Reduces shareholder returns

• Increases business debt

• Requires collateral

What is a drawback of using a bank loan as a source of finance?

• Loan repayments may reduce cash flow

• Provides quick access to large amounts of capital

• Interest rates are fixed and predictable

• Businesses retain full ownership

Which of these is a downside of selling assets to raise finance?

• Can be completed quickly

• Ownership of the business is diluted

• May result in a loss of valuable resources

• Requires regular repayments

What is a disadvantage of issuing share capital as a source of finance?

• Lose some control of the business

• Shareholders expect dividends sometimes

• Interest means you have to pay more back than borrowed

• Monthly repayments cause cash flow problems

What is a positive of using an overdraft facility?

• Funds are available instantly for short-term needs

• Fixed low-interest rates apply

• There are no borrowing limits

• It is suitable for long-term projects

What is a negative of using trade credit?

• No repayment is required

• May harm supplier relationships if payments are late

• Increases business equity

• Limited to long-term financing needs

Which of these is a disadvantage of using venture capital?

• Venture capitalists provide valuable expertise

• Requires no repayments

• Ownership and control are diluted

• Provides access to large funds

What is a benefit of leasing as a source of finance?

• Reduces the need for upfront investment

• Ownership remains with the lessor

• No regular payments are required

• Suitable for long-term ownership

What is a disadvantage of crowdfunding?

• Access to a wide range of investors

• Funds are typically raised quickly

• Campaigns require significant marketing efforts

• It limits the number of potential investors

What is a drawback of government grants as a source of finance?

• Do not need to be repaid

• Funds are not guaranteed and may have restrictions

• Improve cash flow without interest costs

• Are widely available to all businesses