Finance Basics Quiz for Startups

Study Notes

Internal Sources of Finance

Internal sources of finance are funds generated from within the company's operations, not from external investors or lenders.

External Sources of Finance

Primary external sources of finance for a startup company often include venture capital, angel investors, and crowdfunding. These sources provide capital to support the initial stages of growth and development.

Disadvantages of External Sources of Finance

A disadvantage of using external sources of finance is the potential loss of control over the company's operations and decision-making. External investors often come with conditions and requirements that can impact the company's freedom.

External Sources of Finance Examples

Examples of external sources of finance include bank loans, venture capital, and equity financing.

Risks of Relying Heavily on External Finance

Relying heavily on external finance can expose the company to significant risks, including:
- Debt burden: High levels of debt can create significant financial pressure, especially during periods of economic downturn.
- Loss of control: External investors often demand a say in company decisions, which can dilute the founder's power.
- Dilution of ownership: Issuing new equity to outside investors can reduce the founder's stake and control over the company.

Description

Test your knowledge on the sources of finance, both internal and external, for startup companies. This quiz covers advantages and disadvantages of various financing options. Challenge yourself with questions designed for budding entrepreneurs and finance enthusiasts.