1.3.4 Sources of Business Finance

Question 1

Crowdfunding:

Answer 1

raising capital online from
many small investors (but not through the stock
market).

Question 2

Dividends:

Answer 2

payments made to shareholders
from the company’s yearly profi ts. The
directors of the company decide how large a
dividend payment to make; in a bad year they
can decide on zero.

Question 3

Retained profi

Answer 3

profi t kept within the business
(not paid out in dividends); this is the best
source of fi nance for expansion.

Question 4

Share capital:

Answer 4

raising fi nance by selling part-
ownership in the business. Shareholders

have the right to question the directors and to
receive part of the yearly profi ts.

Question 5

Venture capital:

Answer 5

a combination of share capital
and loan capital, provided by an investor willing
to take a chance on the success of a small to
medium-sized business.