Sources of finance：练习题

A fast-growing private limited company is considering how to finance the acquisition of a new automated production line costing \$500,000. The directors are concerned about high interest rates and wish to avoid increasing the company's gearing ratio. Which source of finance would best meet these requirements?

An manufacturing firm is experiencing high levels of bad debt and slow payments from its industrial customers. It needs to improve its immediate cash flow. Which external source of finance would be specifically designed to address this problem by providing immediate liquidity based on the value of its invoices?

A company is evaluating whether to use an overdraft or a short-term bank loan to manage its seasonal fluctuations in inventory. What is a distinct advantage of using an overdraft for this purpose?

A startup technology company requires significant capital for research and development. The founders have exhausted their personal savings and have no tangible assets to offer as security for a loan. They are willing to give up a minority ownership stake in exchange for funding and strategic mentorship. Which source of finance is the most suitable?

Which of the following best describes internal sources of finance for a private limited company?

A company faces a seasonal cash shortage but wants to avoid long-term debt or losing ownership. Explain why a bank overdraft might be a more suitable source of finance in this situation than a long-term bank loan.

A large public limited company is considering venture capital versus a rights issue of shares to fund a major expansion. Evaluate which source of finance is more likely to lead to a loss of control for existing majority shareholders.

An established engineering firm needs to raise \( \$2 \) million for a new production facility. They are considering the following two options:
Option 1: Issuing debentures at a fixed interest rate of \( 6\% \).
Option 2: Seeking venture capital in exchange for a \( 20\% \) equity stake.

(a) Explain one benefit and one limitation of using debentures.
(b) Evaluate which source of finance would be more appropriate for this business, considering its need to retain control and manage long-term debt.