Lesson 1.3.4a
1.3.4a Short-term sources: overdraft and trade credit Quiz: Pearson Edexcel Business, Unit 3
20 questions
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Lesson 1.3.4a, Short-term sources: overdraft and trade credit: 20 multiple choice questions for the Pearson Edexcel GCSE Business (1BS0), Unit 3: Putting a business idea into practice, written with Revision Ninja.
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The 20 questions
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What is a bank overdraft?
- Share capital investment
- Government business grant
- Long-term business loan
- Borrowing limit facility
-
What term describes the agreement allowing businesses to receive goods now and pay later?
- Venture capital
- Bank overdraft
- Retained profit
- Trade credit
-
Which of these is a short-term source of finance?
- Share capital
- Mortgage loan
- Retained profit
- Trade credit
-
Why is a bank overdraft considered a flexible short-term source of finance?
- No interest charged
- Interest on used amount
- Long repayment period
- Fixed monthly payments
-
A business has £500 in its bank account and an overdraft limit of £1,000. What is the most it can spend before it exceeds the facility?
- £500
- £1,500
- £1,000
- £2,000
-
A café has an overdraft limit of £3,000 and is currently overdrawn by £2,450. How much further can it draw on the overdraft?
- £3,000
- £2,450
- £5,450
- £550
-
What is the main cash flow benefit of using trade credit?
- Lower interest rates
- Delaying payment
- Guaranteed profits
- Immediate cash injection
-
Which of these is a key disadvantage of a bank overdraft?
- Collateral always required
- Guaranteed long term
- Recall at short notice
- High fixed fees
-
Who primarily provides trade credit to a business?
- Commercial banks
- Government agencies
- Shareholders
- Its suppliers
-
What is the main cash flow benefit of 45-day trade credit?
- Immediate cash inflow
- Guaranteed sales volume
- Delayed cash outflow
- Permanent cost reduction
-
Which short-term finance lets a shop pay only after selling goods?
- Bank overdraft
- Venture capital
- Share issue
- Trade credit
-
Why might a supplier refuse trade credit to a newly established business?
- Excessive profits
- Government regulations
- High share capital
- Lack of trading history
-
Why is trade credit usually cheaper than a bank overdraft?
- Fixed repayment terms
- Normally interest-free
- Lower bank charges
- Government subsidised rates
-
Which of these is NOT a short-term source of finance?
- Mortgage loan
- Bank overdraft
- Commercial credit
- Trade credit
-
What risk does a bank demanding quick overdraft repayment create for a firm?
- Mandatory share issue
- Forced sale of assets
- Immediate liquidation
- Automatic bankruptcy
-
Which situation best suits a short-term overdraft?
- Long-term factory expansion
- Permanent premises upgrade
- Temporary cash shortfall
- Purchasing company vehicles
-
Which source gives immediate cash to pay wages during late customer payments?
- Bank overdraft
- Share capital
- Retained profit
- Trade credit
-
What effect does quick cash sales on trade credit have on overdraft needs?
- Eliminates credit terms
- Decreases overdraft need
- Stops overdraft charges
- Increases overdraft need
-
Why must a business carefully monitor its bank overdraft usage?
- High interest costs
- Fixed monthly limits
- Supplier payment delays
- Mandatory equity dilution
-
Which short-term finance source is normally interest-free if paid on time?
- Long-term loan
- Bank overdraft
- Venture capital
- Trade credit
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