Cambridge IGCSE · Business Studies (0450)

Business finance: needs and sources: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Business finance: needs and sources.

10 questions29 marksFree, no account

Question 1

1 mark

Which of the following is considered an internal source of finance for an established enterprise wishing to fund its expansion?

Question 2

1 mark

An entrepreneur negotiates trade credit with a supplier to purchase raw materials for a new enterprise. Which of the following is the most likely advantage for the entrepreneur?

Question 3

1 mark

A large limited company plans to finance a major long-term expansion project. Which source of finance is most suitable for this purpose?

Question 4

1 mark

Which source of finance involves a business obtaining the use of equipment or machinery by making regular payments, but without ever owning the asset during the agreement period?

Question 5

1 mark

Which of the following is considered an internal source of finance for an existing limited company that is looking to expand its operations?

Question 6

3 marks

Why might a new social enterprise prefer a grant over a bank loan for its start-up funding?

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Question 7

6 marks

Evaluate why issuing shares might be a more appropriate source of finance for a major expansion compared to a long-term mortgage for a limited company.

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Question 8

5 marks

Explain one reason why a venture capitalist might invest in a high-risk enterprise when a traditional financial institution has refused a loan.

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Question 9

5 marks

An expanding technology enterprise needs \( \$100,000 \) to purchase new high-speed servers. The owners are debating between using retained profit or issuing new shares.

a) Identify one advantage and one disadvantage of using retained profit for this expansion.
b) Explain how issuing new shares might affect the existing shareholders' control of the enterprise.
c) Recommend which source of finance is more suitable if the owners wish to avoid debt and interest payments.

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Question 10

5 marks

An entrepreneur is considering starting a small landscaping enterprise and needs to secure funding.
a) Define the term venture capital.
b) Identify two internal sources of finance available to an enterprise that has been trading successfully for several years.
c) Explain one advantage and one disadvantage to an entrepreneur of using a bank loan to fund start-up costs.

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