IB BMan 3.1 Sources of Finance

Question 1

External sources of finance will involve a financial reward to the providers such as interest.

Accepted Answer

True

Question 2

Hire purchase and leasing saves a business money by not making a large initial down payment.

Accepted Answer

True

Question 3

This external source of finance is the most flexible.

Accepted Answer

Bank Overdraft

Question 4

A debt factor's profits are made by not paying the business the full value (80-90%).

Accepted Answer

True

Question 5

Payments for the daily running of a business are considered:

Accepted Answer

Revenue Expenditures

Question 6

A disadvantage of debentures would be:

Accepted Answer

Increases the gearing ratio

Question 7

Money from government or other agencies to help finance businesses do not need to be paid back.

Accepted Answer

Grants

Question 8

Bonds issued by a company with a fixed rate of interest are called:

Accepted Answer

Debentures

Question 9

Selling assets is another form of external sources of finance.

Accepted Answer

False

Question 10

When choosing a source a finance a business must consider:

Accepted Answer

all choices are correct

Question 11

Selling the accounts receivable to another business in order to receive cash is called:

Accepted Answer

Debt Factoring

Question 12

The main source of finance for sole traders and partnerships are:

Accepted Answer

Personal Savings

Question 13

External sources of finance are raised from inside the business.

Accepted Answer

False

Question 14

Using retained profits will incur interest charges.

Accepted Answer

False

Question 15

Trade credit is a source of finance because the business is delaying payment.

Accepted Answer

True

Question 16

Equity financing is when limited companies issue shares.

Accepted Answer

True

Question 17

Variable rate loans can be more expensive than fixed rate loans.

Accepted Answer

True

Question 18

Buy now, pay later is this form of external financing.

Accepted Answer

Trade Credit

Question 19

An advantage of using debentures vs. selling shares is:

Accepted Answer

The owners has more control

Question 20

Fixed assets can be used as collateral to secure a loan.

Accepted Answer

True

Question 21

Making monthly payments to pay for a fixed asset over 12-24 months is called:

Accepted Answer

Hire Purchase

Question 22

Fixed assets are intended for resale.

Accepted Answer

False

Question 23

Internal sources of finance are useful to businesses for all reasons except:

Accepted Answer

helps with rapid growth

Question 24

Retained profits is also known as ploughed back or internal profits.

Accepted Answer

True

Question 25

Unincorporated businesses have unlimited liability which means:

Accepted Answer

they can lose all property owned

Question 26

Working capital is calculated by:

Accepted Answer

current assets - current liabilities

Question 27

This is a medium source of finance:

Accepted Answer

Hire Purchasing

Question 28

An advantage of using retained profits is:

Accepted Answer

Business has control over what they use money for

Question 29

Leasing is similar to hire purchasing except that:

Accepted Answer

You have an option to purchase the asset at the end

Question 30

Investing extra cash can be another internal source of finance by:

Accepted Answer

Earning interest on investments

Question 31

Medium term financing is:

Accepted Answer

1 - 5 years

Question 32

Using retained earnings can cause conflict with which stakeholder?

Accepted Answer

Shareholders

Question 33

A form of internal finance is selling assets.

Accepted Answer

True

Question 34

Higher risk business will have to pay a higher rate of interest in order to get a loan.

Accepted Answer

True

Question 35

The finance spend on purchasing fixed assets and other large priced items is called:

Accepted Answer

Capital Expenditure

Question 36

Someone who owes the business money is called a(n):

Accepted Answer

accounts receivable

Question 37

Businesses need finance for:

Accepted Answer

All choices are correct

Question 38

The terms of trade credit are usually between:

Accepted Answer

30-90 days

Question 39

Businesses sell assets because:

Accepted Answer

All answers are correct

Question 40

These individuals invest in smaller companies and take a higher risk of lending money to them.

Accepted Answer

Venture Capitalists

IB BMan 3.1 Sources of Finance

Questions 40

IB BMan 3.1 Sources of Finance

Questions 40