Sources of finance 0.0 / 5 ? Business StudiesFinancial PlanningA2/A-levelAQA Created by: nareen.lawkCreated on: 11-03-19 15:37 What is an overdraft? When a business is allowed to spend more than it holds in its current bank account up to an agreed limit 1 of 15 Advantages of overdraft Flexible way of funding day-to-day financial requirements and interest is only payable on the actual amount borrowed 2 of 15 Disadvantages of overdraft High interest rates, bank can ask for repayment at anytime 3 of 15 What is a bank loan? An amount of money provided to a business for a stated purpose in return for a payment in the form of interest 4 of 15 Advantages of a bank loan Can be negotiated to meet a business's precise requirements and managers can plan for repayments within budgets 5 of 15 Disadvantages of a bank loan Inflexible - business may pay interest on funds they are not using 6 of 15 Advantages of retained profits? 'Free' source of finance -no interest rates and do not involve any loss of cotrol by owner 7 of 15 Disadvantages of retained profits? Shareholders may want in the form of dividends and business may lose out on valuable investment 8 of 15 Venture capital? Funds advanced to businesses thought to be relatively high risk in the form of share loan capital 9 of 15 Advantages of venture capital Expertise into business as part of deal and no interest paid on funds 10 of 15 Disadvantages of venture capital Usually only able to raise small amounts of finance 11 of 15 Short-term, internal source of finance Retained profits 12 of 15 Short term, external source of finance Overdrafts 13 of 15 Long term, internal sources of finance Retained profit and sale of assets 14 of 15 Long term, external sources of finance Bank loans, mortgages, debentures, venture capital and share capital 15 of 15
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