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A sole trader invests $500 000 into her business - HSC - SSCE Business Studies - Question 6 - 2017 - Paper 1
Question 6
A sole trader invests $500 000 into her business. What is this an example of? A. An overdraft B. Retained profits C. Internal debt finance D. Internal equity finance
Worked Solution & Example Answer:A sole trader invests $500 000 into her business - HSC - SSCE Business Studies - Question 6 - 2017 - Paper 1
Step 1
What is this an example of?
Answer
This scenario describes a situation where a sole trader uses personal funds to start or expand their business. The investment of $500,000 is considered internal equity finance because it represents the owner's own capital being injected into the business.
Internal equity finance is distinct from debt funding, as it does not involve borrowing money that needs to be repaid. Therefore, the correct answer is:
D. Internal equity finance