Lesson 3.5.3

3.5.3 Making financial decisions: sources of finance Quiz: AQA Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.5.3, Making financial decisions: sources of finance: 20 multiple choice questions for the AQA Business (7132), Unit 5: Financial management, written with Revision Ninja.

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The 20 questions

  1. Retained profit is:

    • Money borrowed from a bank for a fixed term
    • Share capital raised from a stock market listing
    • Payments received from customers in advance of delivery
    • Profit kept in the business after dividends are paid, used to finance future activity

  2. Debt factoring involves:

    • Issuing new shares to existing shareholders
    • Selling unpaid customer invoices to a third party at a discount to receive cash quickly
    • Borrowing money from family members at zero interest
    • Renting out surplus office space to tenants

  3. An overdraft is:

    • A share of the business sold to an investor for equity
    • A flexible short-term facility allowing an account to go below zero up to an agreed limit
    • Money raised from the public through a crowdfunding website
    • A fixed long-term loan repaid in equal monthly instalments

  4. Venture capital is:

    • Short-term credit from suppliers for stock purchases
    • A bank loan secured against the owner's home
    • Finance from investors who provide equity to higher-risk start-up or growing businesses in return for a share of ownership
    • Grants from government to support local projects

  5. Crowdfunding means:

    • Borrowing from a single large bank at a fixed rate
    • Raising small amounts of money from a large number of people, often through an online platform
    • Selling unpaid invoices to a factoring company
    • Selling shares to employees at a discount

  6. Share capital is:

    • Credit granted by suppliers for purchases
    • Profit retained from previous years
    • Finance raised by selling shares in a company, giving investors ownership rights
    • Money borrowed from a bank that must be repaid with interest

  7. Which source of finance is most suitable for short-term needs?

    • A long-term bank loan
    • An overdraft
    • Share capital
    • Venture capital

  8. A key disadvantage of an overdraft is that:

    • It requires shares to be issued to the bank
    • It gives the bank permanent ownership of the business's assets
    • It carries no interest charge at any time
    • It is repayable on demand and interest rates can be high, making it risky for long-term needs

  9. A business needs 500,000 for a new factory, to be repaid over ten years. Which source is most suitable?

    • Trade credit from suppliers
    • An overdraft
    • A long-term bank loan
    • Debt factoring

  10. What is an advantage of raising finance through share capital rather than a loan?

    • Shareholders have no right to a share of profits or any voice in decisions
    • Shareholders receive a guaranteed fixed return each year
    • Dividends must be paid at a fixed rate every year
    • No regular interest payments are required, and the money does not have to be repaid

  11. A business has invoices worth 80,000 and a factor offers 90% of their value immediately. How much cash is received upfront?

    • 72,000
    • 8,000
    • 64,000
    • 80,000

  12. A business with high retained profit funds expansion internally. What is a key advantage?

    • It requires the business to sell new shares to the public
    • It always comes with a set repayment schedule
    • No interest to pay and no loss of control, although the funds may be limited
    • It is a form of external borrowing with fixed repayments

  13. Which is a likely drawback of crowdfunding?

    • It always requires a government guarantee
    • Campaigns may fail to reach their target, and rewards or equity may have to be given to backers
    • It gives backers voting rights on every company decision automatically
    • It forces the business to repay all funds immediately

  14. A venture capitalist invests 1,000,000 for 30% of a start-up. What is the implied value of the whole company?

    • 300,000
    • 1.3 million
    • About 3.33 million
    • 10 million

  15. Which source of finance gives a business permanent long-term capital with no repayment obligation?

    • Trade credit
    • Debt factoring
    • An overdraft
    • Share capital

  16. Evaluate: what is the strongest argument for choosing a long-term loan over share capital for a profitable family firm?

    • Share capital gives owners more debt risk
    • A loan never has to be repaid, so it is always cheaper
    • Loans remove all obligations to stakeholders
    • The owners keep full control and profits, provided the business can comfortably meet regular interest payments

  17. A business can borrow 2 million at 8% interest or give up 25% of its ownership for the same sum. What is the main trade-off?

    • Loan interest is optional and can be ignored
    • Equity has no effect on future profits or control
    • Interest is a fixed cash cost, while giving up equity means sharing future profits and control permanently
    • Both options have identical long-term costs in every case

  18. Why might a short-term overdraft be a poor choice to finance a long-term capital investment?

    • Overdrafts can be recalled at short notice and charge high interest, so they do not match the long life of the asset
    • Overdrafts carry no interest and are repayable in 100 years
    • Overdrafts are only available to public sector bodies
    • Overdrafts require the business to give up equity to the bank

  19. A business has 300,000 of retained profit available but needs 450,000 for an investment. How much external finance is needed?

    • 750,000
    • 300,000
    • 450,000
    • 150,000

  20. Which factor most strongly determines whether a business should use crowdfunding?

    • Whether it has a long history of debt repayment to banks
    • Whether it is a public limited company with a stock market listing
    • Whether it has a product with strong public appeal and the marketing reach to attract many small backers
    • Whether it has a large existing bank overdraft

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