Using the list of sources of finance below, match each internal or external source of finance to

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Question:

Using the list of sources of finance below, match each internal or external source of finance to the most suitable scenario. One source matches each scenario.

a)Retained profit

b)Sale and leaseback

c)Trade credit

d)Debt factoring

e)Bank overdraft

f)Leasing

g)Ordinary shares

h)Bank loan

i)Venture capital

j)Government grant

k)Sale of assets

Scenario

Source of finance

1.The company is earning high profits and wishes to expand further in a steady manner. Its existing shareholders are agreed on its expansion strategy and do not want to put the company into further debt.

2.The private limited company has grown rapidly and is seeking to undertake a major expansion programme. Currently, interest rates are very high and this has reduced business activity. However, the organisation is confident that the programme will start to produce good returns in 5-10 years' time and eventually reap very high rewards.

3.A small retailer is hoping to expand and increase its stocks of confectionery items and newspapers but has poor liquidity with limited cash flow with which to purchase the required items.

4.An established firm is hoping to update its computer network to facilitate its expansion plans and has calculated a 3-year payback on the investment. After the increase in sales from the investment it then wishes to repay the sum needed.

5.A small sole trader inventor has just started to receive regular orders from a number of local businesses for its new product. It now needs to raise capital to pay for larger scale production and more promotion.The owner has had difficulties recently in obtaining a loan due to the high risk. However, it is potentially a very profitable activity. The current owner is prepared to share ownership of the business if necessary.

6.A large electronics company is looking to continue its global expansion and is planning on increasing its production capacity by building a new factory and employing 250 people in the UK.

7.Southern builder's merchants selling to trade customers are looking to establish a presence in the North. The company has high sales each of a large value; some of these creditors take over 6 months to pay.

8.A small limousine hire company in the Portsmouth area wishes to expand into Southampton and the surrounding area. It will need 10 more cars. The owners are worried this large investment is over-ambitious.

9.A sports equipment manufacturer with four factories in the UK produces equipment for hockey, rugby, and football and racquet sports such as tennis and squash. The company now wants to focus on the racquet sport market and expansion into the EU. It needs to set up production in Italy.

10. A beachfront restaurant has seasonal sales. The retailer receives a special offer in December to purchase a new larger cooker at discount. The purchase is essential to cope with orders during the rest of the year. It would result in a negative cash flow but the restaurant will be able to cover the cost as soon as the early spring sales pick up.

11. A successful insurance provider operates using call centres. It needs to set up a second call centre. The owners wish to avoid losing ownership and becoming highly geared. The company owns the premises and the computers used in the call centres.