Task 1: Classifying Sources of Finance

Table 1: Sources of Finance for Limited Companies

Table 1 above shows sources of finance for limited companies. Identify four internal sources of finance in table 1 and list them in table 2.

Table 2: Internal Sources of Finance

Internal Sources of Finance

Identify the external sources of finance in table 1 and use table 3 below to classify them into Short term sources, medium term sources and long-term sources. Do not write in the coloured boxes.

Table 3: External Sources of Finance

Short Term	Medium-term	Long-Term

Task 2: Comparing Ordinary Shares with Preference Shares

Use the table below to explain the difference between ordinary shareholders and preference shareholders. You must explain two differences in how their dividends are paid, the difference between voting rights, and the differences in how each type of shareholder is treated when a business is liquidated.

	Ordinary Shares	Preference Shares
Dividends
Dividends
Voting Rights
What happens when the company is liquidated?

Task 3: Recording Issued Share Capital

A company has an authorised capital of:

2 million ordinary shares of 1 each

500 000 10% preference shares of 1 each

The company has issued:

1 million ordinary shares at a premium of 25p each

500 000 10% preference shares at par

(All issued shares are fully paid)

Complete the following table to show the amount that will be entered in each account:

Account	Amount
Issued Ordinary Capital
Issued Preference Capital
Share Premium Account
Total Amount

Task 4: Comparing Long-Term Loans with Share Capital

Use the table below to explain the advantages and disadvantages of issuing share capital. You must write full sentences.

Advantages of Ordinary Shares	Disadvantages of Ordinary Shares

Use the table below to explain the advantages and disadvantages of long-term loans. You must write full sentences.

Advantages of Long-Term Loans	Disadvantages of Long-Term Loans