Lesson 2.1.1
2.1.1 Internal sources of finance Quiz: Pearson Edexcel Business, Unit 2
20 questions
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Lesson 2.1.1, Internal sources of finance: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 2: Managing business activities, written with Revision Ninja.
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The 20 questions
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Which source of business finance is classified as internal?
- Retained profit
- Trade credit
- Venture capital
- Bank loan
-
A sole trader invests £15,000 of her personal savings into her business. What type of finance is this?
- Venture capital
- Trade credit
- Bank overdraft
- Owner's capital
-
What is a key financial advantage of using internal sources of finance?
- Unlimited funds
- Tax exemption
- Guaranteed profit
- No interest paid
-
What is a major limitation of relying solely on retained profit for business expansion?
- High interest costs
- Diluted share capital
- Limited available funds
- Loss of ownership
-
Selling an unused delivery van to raise cash is an example of which source of finance?
- Trade credit
- Peer-to-peer funding
- Crowdfunding
- Sale of assets
-
A business has £8,000 of retained profit and needs £20,000 for a new machine. What is the shortfall?
- £12,000
- £28,000
- £8,000
- £20,000
-
What is a potential drawback of selling machinery to raise capital?
- Loss of ownership
- Loss of asset
- Monthly repayments
- High interest rates
-
Why might a founder prefer using personal savings over a bank loan?
- Provides unlimited capital
- Avoids debt repayments
- Gives tax relief
- Increases share capital
-
What is the main risk of relying exclusively on retained profits to fund future expansion?
- Loss of control
- Slower business growth
- High gearing
- Insolvency risk
-
Which of the following is an external source of finance?
- Retained profit
- Venture capital
- Personal savings
- Sale of assets
-
A business has retained profit of £30,000 and sells an old lorry for £12,000. What is the total internal finance raised?
- £12,000
- £30,000
- £42,000
- £18,000
-
An owner invests £10,000 of savings and the business later retains £5,000 of profit. What is the total internal finance?
- £10,000
- £5,000
- £15,000
- £20,000
-
What is the main drawback of paying high dividends out of profit?
- Lower retained profit
- Higher tax liability
- Increased share price
- Greater debt burden
-
What is a major advantage of using internal finance over external finance?
- Guaranteed profits
- Tax exemption
- No interest payments
- Unlimited funds
-
What form of finance is created when an owner invests personal funds into their business?
- Venture capital
- Retained profit
- Trade credit
- Owner's capital
-
What term describes profit kept in the business after paying tax and dividends?
- Retained profit
- Owner's capital
- Gross profit
- Operating profit
-
Which source of finance allows a firm to expand without losing ownership control?
- Share capital
- Venture capital
- Retained profit
- Business angels
-
Which internal source of finance consists of the owner's personal savings?
- Retained profit
- Bank overdraft
- Sale of assets
- Owner's capital
-
A business has an annual profit of £60,000 and pays out £20,000 as dividends. How much profit is retained?
- £60,000
- £20,000
- £40,000
- £80,000
-
What is a major limitation of relying solely on internal sources of finance?
- Slow growth rate
- High interest rates
- Strict collateral terms
- Loss of control
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