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3.2 True or False Quiz

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  • Unit 3 - Finance/
  • 3.2 Sources of finance/
  • 3.2 True or False Quiz

Unit 3.2 - True or False Quiz

To test your understanding of this topic (Sources of finance), answer the following true or false questions.

No. StatementTrue or False?
1.A business angel provides finance and expertise to small business start-ups, such as organizing networking opportunities.
True
2.Spending money on a new cybersecurity system is an example of capital expenditure.
True
3.Business angels are investors who provide grant to businesses approved by the government.
False
4.Spending money on wages and salaries is an example of revenue expenditure.
True
5.A disadvantage of leasing is that at the end of the lease contract the hirer has to return the goods.
True
6.An advantage of using retained profit as an internal source of finance is the lack of interest charges.
True
7.An example of short-term finance is bank overdrafts.
True
8.Share capital is an example of an internal source of finance.
False
9.Issuing of shares as a source of finance is not available to a sole trader or ordinary partnership.
True
10.A rise in the exchange rate would directly affect the amount of interest paid by a business on a bank loan.
False
11.A disadvantage of a bank loan as a source of finance is that interest repayments must be made even if the business is making a loss.
True
12.Funds raised from a bank loan is an example of external finance.
True
13.The finance that a business needs for its day-to-day running is known as working capital.
True
14.An overdraft allows businesses to spend more than they have in their bank account so can help in settling short-term debts.
True
15.Long-term finance refers to loans which will be paid off over a duration of more than ten years.
False
16.Money that may be drawn from a bank account up to an agreed limit is known as an overdraft.
True
17.An advantage of share capital as a source of finance is that it is a permanent source of finance for a limited liability company.
True
18.A bank loan from HSBC, a publicly held company, is an example of a source of finance obtained from the public sector.
False
19.Crowdfunding raises finance for a business project by getting small amounts of money from a large number of people, usually through online platforms.
True
20.Suppliers who allow a business to receive goods and services before payment for them are known as trade debtors.
False
21.Loan capital refers to interest-bearing and external sources of finance that increase the firm's level of borrowing.

True

22.Share capital is a source of permanent capital for a limited liability company and that does not incur any interest to the business.

True

23.Firms that rely on loan capital are most vulnerable when interest rates increase.

True

24.Owners’ capital refers to sources of finance that come from internal stakeholders, e.g., personal funds (for sole traders) and shareholders’ funds (for limited liability companies).

True

25.Business angels create a contractual agreement which requires a firm to borrow and pay for the use of an asset, such as property (land), buildings (offices or premises), motor vehicles, and capital equipment.

False - this is leasing

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