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

50 Questions | By Catherinehalcomb | Updated: Mar 22, 2022 | Attempts: 3644

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

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