Unit 3: Finance and Accounts
Topic 3.2: Sources of Finance Questions
Practice 20 exam-style questions for IB Business Management Topic 3.2. Review the question stems below, then unlock the full Question Bank to access markschemes, model answers, and AI grading.
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Ridgeway Farm borrowed $80,000 from its bank, repayable over eight years, to buy a tractor.
State two features of loan capital.
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Define the term short-term finance.
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A business plans to sell old equipment it no longer uses to raise finance.
Explain one disadvantage of this source of finance.
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Kestrel Print waits 60 days to be paid by its customers, so its bank lets its current account go up to $20,000 below zero.
State two features of an overdraft.
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Greenleaf Garden Centre agrees a $12,000 overdraft with its bank to pay for spring stock before its busiest months.
State two features of an overdraft.
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Define the term long-term finance.
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Define the term internal sources of finance.
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Harbour View Hotel has a $25,000 overdraft facility so it can keep paying its suppliers through the quiet winter months.
Define the term overdraft.
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Nayra Quispe weaves alpaca scarves in a village in Peru. No bank would lend to her, but Andes Microcredit, a social enterprise, lent her $300 for a second loom.
State two features of microfinance.
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State two examples of external sources of finance.
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Each August, when classes stop for the summer, a dance studio’s current account falls about $2,000 below zero.
Define the term overdraft.
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Smile Street Dental took a five-year bank loan of $150,000 for new X-ray equipment.
State two features of loan capital.
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Explain one disadvantage of using personal funds as a source of finance for a sole trader.
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Which pairing correctly matches a source of finance to its usual time period?
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A start-up has not made any profits yet. Explain why retained profit cannot be used as a source of finance.
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Sadia Akter keeps chickens outside Dhaka. A microfinance institution lent her $400 for a larger coop, repaid in small weekly amounts.
State two features of microfinance.
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Wheelhouse Cycles used an overdraft to pay its staff in February, when few bicycles are sold.
Define the term overdraft.
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In the week before Valentine’s Day, Petal Street Florist is $3,500 overdrawn while it buys in roses.
State two features of an overdraft.
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Lena’s Bakery Ltd borrowed $400,000 from its bank to build its Mill Lane bakehouse.
State two features of loan capital.
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