ACCA Strategic Business Leader (SBL) Practice Exam

Which of the following is an option for long-term finance?

1. Overdraft

2. Venture capital

3. Short term loan

4. Trade credit

The correct answer is: Venture capital

Venture capital is a well-suited option for long-term finance as it involves investment from firms or individuals who provide capital to start-ups and small businesses that exhibit high growth potential in exchange for equity or convertible debt. This funding is typically utilized to support business development for an extended period, often until the business becomes self-sustaining or can be sold for a profit. In contrast, the other options are primarily short-term or immediate financing solutions. An overdraft allows businesses to withdraw more money than they have in their bank account, providing short-term liquidity. A short-term loan is designed to be repaid within a year and typically addresses immediate financial needs. Trade credit refers to the extension of credit by suppliers to businesses, allowing them to buy now and pay later, which is also a short-term financing mechanism.