Lesson 3.5.3

3.5.3 Making financial decisions: sources of finance Quiz: AQA Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.5.3, Making financial decisions: sources of finance: 20 multiple choice questions for the AQA Business (7132), Unit 5: Financial management, written with Revision Ninja.

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The 20 questions

  1. Which term describes profit kept in a business after dividends are paid to owners?

    • Share capital
    • Retained profit
    • Gross profit
    • Venture capital

  2. Which source of finance involves selling unpaid trade receivables to a third party at a discount?

    • Venture capital
    • Bank loan
    • Debt factoring
    • Crowdfunding

  3. Which source of finance allows a bank account balance to drop below zero up to an agreed limit?

    • Bank overdraft
    • Venture capital
    • Debentures
    • Mortgages

  4. Which type of finance provides high-risk start-ups with equity funding in return for equity shares?

    • Venture capital
    • Debt factoring
    • Bank overdraft
    • Trade credit

  5. Which method raises small amounts of capital from a large number of individuals online?

    • Debt factoring
    • Retained profit
    • Bank loan
    • Crowdfunding

  6. Which term describes long-term equity finance raised by selling ownership shares in a company?

    • Bank loan
    • Overdraft
    • Trade credit
    • Share capital

  7. Which source of finance is most suitable for short-term needs?

    • A long-term bank loan
    • An overdraft
    • Share capital
    • Venture capital

  8. What is a major disadvantage of using a bank overdraft for financing?

    • Repayable on demand
    • Loss of ownership
    • High fixed dividends
    • Dilution of equity

  9. Which source of finance is best suited for buying a factory over a ten-year repayment period?

    • Trade credit
    • Bank overdraft
    • Debt factoring
    • Long-term bank loan

  10. What is a major advantage of raising finance through share capital rather than a loan?

    • No interest payments
    • Fixed repayment dates
    • No ownership dilution
    • Guaranteed profit returns

  11. A business has invoices worth 80,000 and a factor offers 90% of their value immediately. How much cash is received upfront?

    • 72,000
    • 8,000
    • 64,000
    • 80,000

  12. What is a key advantage of using retained profit to fund business expansion?

    • No interest charges
    • Increased share price
    • Immediate tax relief
    • Unlimited funding capacity

  13. What is a major potential disadvantage of using crowdfunding to raise finance?

    • High interest rates
    • Forced asset sales
    • Loss of control
    • Campaign failure risk

  14. A venture capitalist invests 1,000,000 for 30% of a start-up. What is the implied value of the whole company?

    • 300,000
    • 1.3 million
    • About 3.33 million
    • 10 million

  15. Which source of finance gives a business permanent long-term capital with no repayment obligation?

    • Trade credit
    • Debt factoring
    • An overdraft
    • Share capital

  16. Why might a family firm prefer a bank loan over issuing new share capital?

    • Guaranteed high returns
    • Avoids interest costs
    • Retains ownership control
    • Zero financial risk

  17. Compared to selling equity, taking on bank debt carries what primary risk?

    • Mandatory interest payments
    • Loss of control
    • Diluted voting rights
    • Permanent ownership loss

  18. Why is an overdraft unsuitable for funding long-term capital investments?

    • Long repayment terms
    • Diluted business ownership
    • Short-notice recall risk
    • High fixed interest

  19. A business has 300,000 of retained profit available but needs 450,000 for an investment. How much external finance is needed?

    • 750,000
    • 300,000
    • 450,000
    • 150,000

  20. What makes a product particularly suitable for successful crowdfunding?

    • Strong public appeal
    • High production costs
    • Low profit margins
    • Complex B2B features

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