1. Lim Sei Kee @ cK

2.  Matching exercise to test your understanding of the various sources of finance

3.  1. Trade creditor  Supplier – buy goods now and pay later

4.  2. Bank loan  Fixed sum borrowed for a fixed period from bank

5.  3. Bank overdraft  Facility available from the bank

6.  4. Own money  Entrepreneur invests own cash

7.  5. Hire purchase  Pay for things in instalments

8.  6. Shares  Sell a stake in the company

9.  7. Leasing  Use the machine but do not own it

10.  Answer ALL the following multiple choices questions.

11.  1. Which of the following is a disadvantage of Capital contributions?  A. High interest charges  B. The business only has 30 – 60 days to repay the owner  C. Limited to personal resources  D. Interest free because you own the money

12.  1. Which of the following is a disadvantage of Capital contributions?  A. High interest charges  B. The business only has 30 – 60 days to repay the owner  C. Limited to personal resources  D. Interest free because you own the money

13.  2. No set repayment and no interest charges are advantages of which of the following sources of finance?  A. Internal  B. External  C. Term loan  D. Capital contributions only

14.  2. No set repayment and no interest charges are advantages of which of the following sources of finance?  A. Internal  B. External  C. Term loan  D. Capital contributions only

15.  3. Which of the following is an advantage of a term loan?  A. Readily accessible  B. It makes it possible to purchase expensive items  C. No interest charges  D. Repayment can put pressure on cash flow

16.  3. Which of the following is an advantage of a term loan?  A. Readily accessible  B. It makes it possible to purchase expensive items  C. No interest charges  D. Repayment can put pressure on cash flow

17.  4. Which of the following statements is False?  A. Internal sources of finance originate from within the business.  B. External sources of finance are usually liabilities  C. Bank overdrafts can be used by the business for any purpose  D. There is never any interest charged for the use of trade credit

18.  4. Which of the following statements is False?  A. Internal sources of finance originate from within the business.  B. External sources of finance are usually liabilities  C. Bank overdrafts can be used by the business for any purpose  D. There is never any interest charged for the use of trade credit

19.  5. Define Trade Credit:  A. Form of external finance that banks and other lenders provide for a specific purpose, paid over a period of time.  B. An internal source of finance referring to the amount of money contributed to the business from the business owners personal resources  C. An external source of finance provided by a bank which allows the account holder to withdraw more than their current account balance  D. A facility offered by some suppliers which allows customers to purchase goods/ services and pay at a later date

20.  5. Define Trade Credit:  A. Form of external finance that banks and other lenders provide for a specific purpose, paid over a period of time.  B. An internal source of finance referring to the amount of money contributed to the business from the business owners personal resources  C. An external source of finance provided by a bank which allows the account holder to withdraw more than their current account balance  D. A facility offered by some suppliers which allows customers to purchase goods/ services and pay at a later date

21.  6. Which of these is a form of an asset that is paid for a certain length of time which allows the business to control and to use it  A. Term loan  B. Retain earnings  C. Leasing  D. Capital contributions

22.  6. Which of these is a form of an asset that is paid for a certain length of time which allows the business to control and to use it  A. Term loan  B. Retain earnings  C. Leasing  D. Capital contributions

23.  7. Which of the following sources of finance has the least risk?  A. Capital contributions  B. Trade credit  C. Term loan  D. Bank overdraft

24.  7. Which of the following sources of finance has the least risk?  A. Capital contributions  B. Trade credit  C. Term loan  D. Bank overdraft

25.  8. Reduction of initial payment to acquire assets, little maintenance and repair costs but no ownership of assets is which of the following?  A. Trade credit  B. Bank overdraft  C. Retained earnings  D. None of the above

26.  8. Reduction of initial payment to acquire assets, little maintenance and repair costs but no ownership of assets is which of the following?  A. Trade credit  B. Bank overdraft  C. Retained earnings  D. None of the above

27.  9. Which of these is a short term source of finance?  A. Mortgage  B. Share issue  C. Bank overdraft  D. Debenture

28.  9. Which of these is a short term source of finance?  A. Mortgage  B. Share issue  C. Bank overdraft  D. Debenture

29.  10. Which of these sources of finance must be paid back?  A. Retained profit  B. Share issue  C. Grant  D. Bank loan

30.  10. Which of these sources of finance must be paid back?  A. Retained profit  B. Share issue  C. Grant  D. Bank loan

31.  Decide whether each of the 15 sources of finance given can be classed as either Internal or External methods.

32.  INTERNAL  Selling assets  Chasing debtors  Owner funds  Retained profits  Reducing stocks  Share capital  EXTERNAL  Issuing shares  Leasing  Mortgage  Overdraft  Government grants  Hire purchase  Loans  Trade credit  Venture capital

33.  Complete the paragraph so that it makes sense by selecting the correct word from each menu

34.  There are two main types of finance available to a business. The easiest to use is [ external finance / short term finance / long-term finance / internal finance ]. An example of this would be [ share capital / government grant / retained profit / bank overdraft / bank loan ].

35.  Alternatively a business can use [ external / internal / short term / medium term ] sources of finance, such as [ the sale of assets / owners fund / retained profit / a bank loan ].  If a business is providing jobs in an area of high unemployment they may be able to obtain [ bank loan / trade credit / a mortgage / a government grant ]. The sources of finance used can affect the costs of a business.

36.  For example, if a business obtained computers by using [ trade credit / a lease / owners funds / retained profits ] then they would have to make regular payments. This would make them a [ running cost / start up cost ] rather than a [ running cost / start up cost ]