25 questions
Which answers below are advantages of being a sole trader?
As a sole trader the firm have more assets to secure a loan on
The owner keeps all the rewards of their efforts - i.e. profits
The sole trader can take quick decisions without having to refer to anyone else
The owner has limited liability
The business can be set up without much need for paper work or legal documents
Which answers below are disadvantages of being a sole trader?
As a sole trader the firm have less assets to secure a loan on
The owner cannot keep all the rewards of their efforts - i.e. profits
The sole trader cannot easily share the burden of work and may not have all the expertise requried
The owner has limited liability and is personally responsible for all debts
The business can be set up without much need for paper work or legal documents
The proper term for the funds invested into a new sole trader firm by the owner is called ...
Equality
Equity
Capital
Investment
Cash inflow
Which statement(s) are true about payback terms imposed by a bank?
The terms may vary between 1-30 years or more
Payback terms are negotiable but may involved different interest rates being charged
It is less risky for the bank to allow a company to payback over a longer period of time
Longer payback terms make the monthly repayment amount larger
The total amount of interest paid to the lender is larger the longer the payback terms last
Trade Credit allows a business to buy goods and pay for them at an earlier date which helps cash flow. True of False?
True
False
Using Trade Credit means a business may lose out on a prompt payment discount. True of False?
True
False
What may be a valid reason(s) why a sole trader will borrow money from family/friends rather than a bank?
They are more likely to offer lower interest rate or even none at all
They may offer a longer repayment period than a bank
Some banks may refuse to lend to a sole trader if they regard it too risky
If the business fails, the sole trader will not lose any personal belongings
It avoids any issues in personal relationships from occuring
Which is an example of an internal source of finance?
Owners' Funds
Venture Capital
Overdraft
Trade credit
What type of finance involves less profit going to the owners?
Retained profit
Sale of assets
Overdraft
Bank loan
Which of these facts about venture capital is NOT true?
Venture capitalists tend to operate in fairly risky markets
Venture capitalists would be paid a share of the profits
Venture capitalists usually provide money only and have no interest in running the business
Venture capitalists usually invest large sums of money
Which of the following facts about crowd-sourcing is/are TRUE? (choose as many as apply!)
It is a method of internal fund raising
Can also be an excellent marketing tool for a business
It doesn't matter if the product launched is not successful
Great way of raising money quickly, esp. for a new business idea
Long Term sources of finance are for when the time needed to pay the money back is more than...
6 months
1 year
5 years
10 years
Which of the following are DISADVANTAGES of selling shares as a source of funds? (select as many as appropriate)
It means limited liability for the owners
Dividends need to be paid to shareholders
Large sums of money can be raised
Does not apply to Partnerships or Sole Traders