U1, AOS 1: KK2 - Sources of Finance Flashcards
What are the different internal sources of finance available to a business?
Personal Savings: Utilizing personal funds or savings to invest in the business.
Retained Earnings: Reinvesting profits from previous business operations back into the company.
Family and Friends: Seeking financial support from relatives or friends to kick-start the business.
What external sources of finance are available to businesses?
Bank Loans: Acquiring loans from banks with an agreed-upon repayment plan and interest rate.
Venture Capitalists: Acquiring capital from investors in exchange for equity or ownership in the business.
Angel Investors: Securing investments from affluent individuals in return for convertible debt or ownership equity.
Crowdfunding: Raising funds from a large number of people through online platforms for specific business projects.
Trade Credit: Obtaining goods or services now and paying for them later, often extended by suppliers.
Which of the following sources of finance typically involves a formal agreement regarding repayment terms and interest rates?
a) Venture Capitalists
b) Angel Investors
c) Crowdfunding
d) Bank Loans
d) Bank Loans
In exchange for providing capital, which source of finance usually requires a share in the ownership or equity of the business?
a) Bank Loans
b) Angel Investors
c) Crowdfunding
d) Trade Credit
b) Angel Investors
Which financing option often involves raising funds from a large number of people through internet platforms for specific business projects?
a) Venture Capitalists
b) Trade Credit
c) Angel Investors
d) Crowdfunding
d) Crowdfunding
What is the typical characteristic of trade credit as a source of finance for a business?
a) It involves sharing ownership with the lender.
b) It is provided by banks based on a business’s credit history.
c) It involves obtaining goods or services on credit from suppliers.
d) It is a form of investment from wealthy individuals.
c) It involves obtaining goods or services on credit from suppliers.
Which of the following is a form of financing that is obtained from investors who are willing to take on high-risk investments in exchange for potential high returns?
a) Bank Loans
b) Venture Capitalists
c) Angel Investors
d) Trade Credit
b) Venture Capitalists
Which of the following sources of finance involves utilizing one’s own funds or savings for business investments?
a) Personal Savings
b) Retained Earnings
c) Family and Friends
d) Bank Loans
a) Personal Savings
What is the primary characteristic of retained earnings as a source of finance for a business?
a) It involves borrowing from financial institutions.
b) It requires assistance from external investors.
c) It entails reinvesting profits from previous business operations.
d) It relies on contributions from family members.
c) It entails reinvesting profits from previous business operations.
When seeking financial support from relatives or friends to initiate a business, which internal source of finance is being utilized?
a) Personal Savings
b) Retained Earnings
c) Family and Friends
d) Crowdfunding
c) Family and Friends
What distinguishes personal savings from other sources of finance?
a) It involves distributing profits among shareholders.
b) It necessitates repayment with interest.
c) It relies on contributions from family members.
d) It utilizes personal funds or savings for investment.
d) It utilizes personal funds or savings for investment - therefore it does not need to be repaid and no interest is charged, saving the business money.
Which source of finance relies on the profits generated from the business itself to fund its future operations and expansion?
a) Personal Savings
b) Retained Earnings
c) Angel Investors
d) Trade Credit
b) Retained Earnings
