Question 1

Angel investors are professional bankers interested in investing funds in secured businesses.

Accepted Answer

Angel investors are typically affluent individuals who provide capital for startups, often in exchange for ownership equity or convertible debt, not necessarily professional bankers focusing on secured businesses.

Question 2

The Business Development Bank of Canada is a Crown corporation that provides a wide variety of financial services, including export insurance, bonds, loans, and lines of credit to both Canadian exporters and foreign buyers.

Accepted Answer

The Business Development Bank of Canada (BDC) primarily focuses on providing financing, capital, and advisory services to small and medium-sized enterprises in Canada. Export Development Canada (EDC) is the agency that offers export insurance, bonds, loans, and lines of credit to Canadian exporters and foreign buyers.

Question 3

The lessee is the one who lends an asset to someone.

Accepted Answer

The lessee is the one who rents or leases an asset from someone else, not the one who lends it.

Question 4

A financial lease is a mutually agreed-upon commitment by a lessor and lessee under which the latter agrees to lease a specific asset over a specified period of time.

Accepted Answer

A financial lease is indeed a contractual agreement between a lessor and lessee, where the lessee agrees to lease an asset for a significant portion of its useful life, effectively assuming both the risks and rewards of ownership.

Question 5

Sale and leaseback is an arrangement made by someone to sell an asset to a lessee, than leases it back.

Accepted Answer

In a sale and leaseback arrangement, the owner of an asset sells it to a buyer (lessee) and then leases it back from the buyer, allowing the original owner to continue using the asset while no longer owning it.

Question 6

The more important factors that will influence someone to lease or buy an asset are: interest rate, residual value, obsolescence and the risk factors.

Accepted Answer

These factors are crucial in deciding whether to lease or buy an asset. Interest rates affect the cost of financing, residual value impacts the asset's value at the end of the lease or finance term, obsolescence determines how quickly an asset might become outdated, and risk factors include the potential for loss or damage to the asset.

Question 7

CCA is considered a tax-deductible expense and favours leasing an asset versus buying it.

Accepted Answer

CCA (Capital Cost Allowance) is a tax deduction for depreciation of owned assets, not leased ones. Leasing expenses are directly deductible, but CCA applies to purchased assets.

Question 8

In leasing, both the principal and the interest on the loan are tax deductible.

Accepted Answer

In leasing, it is the lease payments that are typically tax-deductible, not the principal and interest on a loan, as leasing does not involve a loan in the traditional sense.

Question 9

Leasing is an alternative to financing working capital accounts such as inventories and trade receivables.

Accepted Answer

Leasing is primarily used for acquiring assets like equipment and vehicles, not for financing working capital accounts such as inventories and trade receivables.

Question 10

Lease payments are tax deductible and represent an important advantage that favours leasing over buying.

Accepted Answer

Lease payments are often considered a business expense and can be deducted from taxable income, which can reduce the overall tax burden for a business, making leasing an attractive option over buying.

Question 11

Working capital and the purchase of non-current assets would be considered ___________________ needs.

Accepted Answer

The answer of Working capital and the purchase of non-current...

Question 12

Funds generated by a business are considered ___________________________ sources of financing.

Accepted Answer

The answer of Funds generated by a business are considered...

Question 13

The equity liability side of the statement of financial position that helps to finance the purchase of assets are considered ___________________________ requirements.

Accepted Answer

The answer of The equity liability side of the statement...

Question 14

Funds provided by investors (shareholders and lenders) are considered ___________________________ sources of financing.

Accepted Answer

The answer of Funds provided by investors (shareholders and lenders)...

Question 15

___________________________ risk has to do with the uncertainty inherent in projecting the level of revenue and profit.

Accepted Answer

The answer of ___________________________ risk has to do with the...

Question 16

___________________________ risk has to do with the quality of security available to satisfy investors.

Accepted Answer

The answer of ___________________________ risk has to do with the...

Question 17

"Institutions" such as banks and private investors that provide funds to a business are classified as ___________________________ of financing.

Accepted Answer

The answer of "Institutions" such as banks and private investors...

Question 18

___________________________ of financing are the "financing instruments" used to buy assets or to finance the growth of a business.

Accepted Answer

The answer of ___________________________ of financing are the "financing instruments"...

Question 19

The ___________________________ principle is the process that relates financial needs to financing requirements in terms of length of time (e.g., mortgage used to finance a house).

Accepted Answer

The answer of The ___________________________ principle is the process that...

Question 20

There are three basic strategies used to finance current assets. The most conservative strategy and most costly takes place when business finance all current assets by ___________________________ borrowings.

Accepted Answer

The answer of There are three basic strategies used to...

Quiz 8: Sources and Forms of Financing

Angel investors are professional bankers interested in investing funds in secured businesses.

The Business Development Bank of Canada is a Crown corporation that provides a wide variety of financial services, including export insurance, bonds, loans, and lines of credit to both Canadian exporters and foreign buyers.

The lessee is the one who lends an asset to someone.

A financial lease is a mutually agreed-upon commitment by a lessor and lessee under which the latter agrees to lease a specific asset over a specified period of time.

Sale and leaseback is an arrangement made by someone to sell an asset to a lessee, than leases it back.

The more important factors that will influence someone to lease or buy an asset are: interest rate, residual value, obsolescence and the risk factors.

CCA is considered a tax-deductible expense and favours leasing an asset versus buying it.

In leasing, both the principal and the interest on the loan are tax deductible.

Leasing is an alternative to financing working capital accounts such as inventories and trade receivables.

Lease payments are tax deductible and represent an important advantage that favours leasing over buying.

Working capital and the purchase of non-current assets would be considered ___________________ needs.

Funds generated by a business are considered ___________________________ sources of financing.

The equity liability side of the statement of financial position that helps to finance the purchase of assets are considered ___________________________ requirements.

Funds provided by investors (shareholders and lenders) are considered ___________________________ sources of financing.

___________________________ risk has to do with the uncertainty inherent in projecting the level of revenue and profit.

___________________________ risk has to do with the quality of security available to satisfy investors.

"Institutions" such as banks and private investors that provide funds to a business are classified as ___________________________ of financing.

___________________________ of financing are the "financing instruments" used to buy assets or to finance the growth of a business.

The ___________________________ principle is the process that relates financial needs to financing requirements in terms of length of time (e.g., mortgage used to finance a house).

There are three basic strategies used to finance current assets. The most conservative strategy and most costly takes place when business finance all current assets by ___________________________ borrowings.