Chapter 13

Which of the following is incorrect?
1. the type of finance sought by a new small business will be contingent on the particular trading form of the business concerned
2. the ratio of debt to equity finance is called gearing
3. a highly geared firm will have a low ratio of debt to equity
4. the permanent capital base of a small firm usually comes from some form of equity investment
5. investment in equity is rewarded by dividends from profits, or a capital gain when shares are sold
According to recent research, what is the average amount of start-up finance received by businesses in the UK:
1. £5,000
2. £10,000
3. £15,000
4. £20,000
5. £25,000
Which of the following statements is true?
1. the main source of external funding is venture capital
2. small businesses use overdrafts much more than they use loans
3. the recession of the early 1990s had little impact on most small businesses
4. UK small businesses are, in effect, net lenders to the banks, since their deposits made outstrip lending
5. venture capitalists expect a rate of return between 5-25 per cent depending on the risk involved
The average venture capital investment size in the UK is reported to be:
1. £2,000,000
2. £4,000,000
3. £6,000,000
4. £8,000,000
5. £10,000,000
The equity gap is:
1. a funding gap held to be between approximately £1,000 and £50,000
2. a funding gap arising solely from supply-side influences
3. a funding gap arising solely from demand-side influences
4. a funding gap held to be between approximately £250,000 and £2 million
5. a funding gap resulting from strict credit controls in the banking sector
Which of the following statements about access to finance across Europe are incorrect?
1. Many small and medium sized enterprises have consistently considered access to finance to be a problem
2. The majority of European SMEs still depend primarily on banks for their external funding
3. In Austria, Denmark, Germany and Spain the equity ratio of small enterprises is lower than in medium-sized enterprises
4. Across Europe, the cost of financing (interest rates and bank charges) tends to be lower for SMEs than for larger enterprises
5. Effective payment periods differ from country to country. In Italy, for example, it takes on average 87 days before payment is made, while Swedish firms collect their debts within an average of 34 days
Overtrading is a key financial issue at which of the following stages of development:
1. conception
2. introduction
3. development / growth
4. maturity
5. decline
Gross margin represents the difference between the sales price and the variable costs. True / False?
1. True
2. False
Break even volume can be calculated using which of the following formulae?
1. variable costs / gross margin
2. fixed costs / gross margin per unit
3. variable costs / gross margin per unit
4. fixed costs / gross margin
5. variable + fixed costs / gross margin per unit
The overheads of a small business does not include which one of the following:
1. the salaries of directors and non production staff
2. rent, rates, insurance and other premises costs
3. raw materials and other production costs
4. telephone, postage, printing and other office costs
5. advertising, exhibitions, selling, and other publicity costs

Chapter 13

Quiz