The Different Sources Of Finance Flashcards
What are the two main categories of sources of finance in business?
Internal and external sources
True or False: Equity financing involves selling shares of ownership in the company.
True
What is the primary advantage of debt financing?
Interest on debt is tax-deductible
Fill in the blank: _______ financing involves borrowing money that must be repaid over a period of time.
Debt
What type of financing involves using the company’s own funds or profits?
Internal financing
Which source of finance does not require repayment, but may involve giving up ownership or control?
Equity financing
What is an example of a short-term external source of finance?
Bank overdraft
What is a common form of long-term external financing for large businesses?
Corporate bonds
What type of financing allows a company to obtain funds without taking on debt or giving up ownership?
Leasing
What is the main disadvantage of equity financing?
Dilution of ownership
Which type of financing involves receiving money from government or non-profit organizations?
Grants
What is a key consideration when choosing between debt and equity financing?
Cost of capital
What is a common form of short-term external financing for small businesses?
Trade credit
What type of financing involves selling accounts receivable at a discount to a third-party?
Factoring
Which source of finance is often used for funding research and development projects?
Venture capital
