Practice Test: IB Business And Management Unit 3.1: Sources Of Finance

50 Questions | Total Attempts: 1510

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Practice Test: IB Business And Management Unit 3.1: Sources Of Finance

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Questions and Answers
  • 1. 
    Directors own the money of incorporated firms and use these on behalf of shareholders.
    • A. 

      True

    • B. 

      False

  • 2. 
    Government grants and subsidies are a form of external financing.
    • A. 

      True

    • B. 

      False

  • 3. 
    Personal finance is the cheapest source of finance.
    • A. 

      True

    • B. 

      False

  • 4. 
    Share issues by a company are considered to be internal sources of finance.
    • A. 

      True

    • B. 

      False

  • 5. 
    Collateral acts as security to a lender in case debtors default on their loans.
    • A. 

      True

    • B. 

      False

  • 6. 
    Capital expenditure is used to pay for the working capital of an organization.
    • A. 

      True

    • B. 

      False

  • 7. 
    High loan capital means the business is likely to suffer during times of rising interest rates.
    • A. 

      True

    • B. 

      False

  • 8. 
    Overdrafts are easier to obtain than most other forms of external finance.
    • A. 

      True

    • B. 

      False

  • 9. 
    Permanent capital is equal to the value of shareholders' funds; i.e. share capital and reserves.
    • A. 

      True

    • B. 

      False

  • 10. 
    It is best if a business reduces obtaining finance from a variety of sources simply because it raises its financial risks.
    • A. 

      True

    • B. 

      False

  • 11. 
    Venture capitalists tend to invest their money in medium to large-sized businesses since they have the best investment track record.
    • A. 

      True

    • B. 

      False

  • 12. 
    A firm which issues debentures at a fixed rate of 12% for five years will benefit if overall interest rates in an economy fall.
    • A. 

      True

    • B. 

      False

  • 13. 
    If interest rates in an economy increase, dividend payments to shareholders will also have to increase.
    • A. 

      True

    • B. 

      False

  • 14. 
    For a large book publishing firm, classify bank interest receivable as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Revenue

  • 15. 
    For a large book publishing firm, classify bank loans as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Income(Revenue)

  • 16. 
    For a large book publishing firm, classify bank overdrafts as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Revenue

  • 17. 
    For a large book publishing firm, classify debentures as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Revenue

  • 18. 
    For a large book publishing firm, classify insurance premiums as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Revenue

  • 19. 
    For a large book publishing firm, classify motor vehicles as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Revenue

  • 20. 
    For a large book publishing firm, classify rent accruals as being:
    • A. 

      Asset

    • B. 

      Liability

    • C. 

      Expense

    • D. 

      Revenue

  • 21. 
    Which of the following is the most feasable reason for using personal finance
    • A. 

      Insufficient internal sources of finance

    • B. 

      Insufficient external sources of finance

    • C. 

      There is no interest obligation

    • D. 

      To please the owners/shareholders of a company

  • 22. 
    Advantages of growth through share issue include all those listed below except:
    • A. 

      Less risk due to the spreading of risks amongst shareholders

    • B. 

      An extra source of funds

    • C. 

      Control of the company is diluted

    • D. 

      Form of motivation for employees who own shares in a company

  • 23. 
    Which of the following is a drawback to a business that issues debentures?
    • A. 

      There is dilution of control

    • B. 

      There is dilution of ownership

    • C. 

      Lenders do not have any voting rights

    • D. 

      The value of liabilities increases

  • 24. 
    Which of the following is a drawback to a business that issues debentures?
    • A. 

      There is dilution of control

    • B. 

      There is dilution of ownership

    • C. 

      Lenders do not have voting rights

    • D. 

      The value of liabilities increases

  • 25. 
    An advantage of using internal funds to purchase a new office building could include
    • A. 

      Limited impact on a firm's working capital

    • B. 

      Lower level of gearing

    • C. 

      Dilution of ownership

    • D. 

      Increased value of fixed assets

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