Question
Which of the following statements is incorrect about financing small and medium businesses: Business angels and crowdfunding are examples of important sources of finance available for small businesses. The cost of obtaining a public listing on the Stock Exchange may be too high for small companies. Venture capital is a source of debt finance used by small and medium businesses. Small and medium businesses can use non-equity finance such as bank overdrafts.term loans, hire purchase and leasing.
Answer
4
(237 Votes)
Quentin
Master · Tutor for 5 years
Answer
Venture capital is a source of debt finance used by small and medium businesses.
Explanation
## Step1:Firstly, let's break down the problem. We have four statements about small and medium business financing that we need to analyze.## Step2: Let's examine each statement in turn and figure out would they bring problems in something called practice. 'Statement A: Business angels and crowdfunding are examples of important sources of finance available for small businesses.' This statement is correct. Business angels, or angel investors, and crowdfunding platforms are indeed important sources of finance that are used by many small businesses to get the funds they need.'Statement B: The cost of obtaining a public listing on the Stock Exchange may be too high for small companies.' This statement is also correct. Listing a company on the Stock Exchange is an expensive process that also involves a lot of paperwork and compliance with strict regulations. It might not only be too pricey for small companies but also unnecessary, especially if their goal is not to raise a large amount of investment.'Statement C: Venture capital is a source of debt finance used by small and medium businesses.' While venture capital can indeed provide necessary financial resources that small and medium businesses need to grow and succeed, it's important to note that these capital investments are not regarded as debt finance. Unlike loans from banks, which need to be repaid over time with accrued interest, venture capital is equity-based financing. Essentially, this means that the investors get ownership interest in the company. So this statement would be incorrect. 'Statement D: Small and medium businesses can use non-equity finance such as bank overdrafts, term loans, hire purchase and leasing.' This statement is correct. Small and medium businesses can use non-equity financing strategies such as bank overdrafts, term loans, hire purchase and leasing.## Step3: After comparing these four statements, we come to the conclusion that the third statement is the one that's incorrect.