Business Studies Multiple Choice Question – 22 May 2021

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

woman draw a light bulb in white board
Photo by Andrea Piacquadio on Pexels.com

Jonny runs a very small wholesale nut business called Jonny’s Nuts. He has decided to apply for a £20,000 bank overdraft to help manage his working capital during the busy Christmas trading period.

What would be ONE benefit for Jonathan of using an overdraft?

Select ONE answer:

  1. The bank CANNOT demand immediate repayment
  2. It is a LONG TERM source of contingency finance
  3. Interest if ONLY paid on the amount owed
  4. It is SUITABLE for purchasing expensive equipment

Show the workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Business Studies KS4 & KS5 classes

The answer is 3

  1. Not correct
  2. Not correct
  3. Correct – Definition of overdraft e.g. a credit facility which is agreed with a bank and money can be withdrawn from an account up to an agreed amount.  If Jonny does not need to use all of the £20 000 he only pays interest on the amount used.  This reduces Jonny’s finance costs compared to other sources of finance such as a bank loan.
  4. Not correct

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.