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