Sources of Finance for Businesses

What are the two main categories of sources of finance for businesses?

• Internal and external

• Short-term and long-term

• Fixed and variable

• Direct and indirect

Which of the following is an internal source of finance?

• Overdraft

• Retained profit

• Trade credit

• Leasing

Which external source of finance involves borrowing money from a bank with the agreement to pay it back with interest?

• Share capital

• Venture capital

• Loans

• Debt factoring

What is the primary advantage of using retained profit as a source of finance?

• No interest payments

• Quick access to funds

• Increases company debt

• Dilutes ownership

Which source of finance involves selling a portion of the company's ownership to raise funds?

• Overdraft

• Share capital

• Trade credit

• Leasing

What is a disadvantage of using an overdraft as a source of finance?

• High interest rates

• Loss of control

• Long-term commitment

• Requires collateral

Which source of finance is most appropriate for a business needing short-term cash flow support?

• Venture capital

• Trade credit

• Sale of assets

• Share capital

What is the main disadvantage of using venture capital as a source of finance?

• High interest rates

• Loss of business control

• Short-term funding

• Requires collateral

Which source of finance involves selling a company's invoices to a third party to improve cash flow?

• Leasing

• Debt factoring

• Owner’s capital

• Loans

What is the primary benefit of using leasing as a source of finance?

• Ownership of the asset

• Lower initial costs

• High resale value

• Long-term commitment