owners capital (personal savings) , retained profit and sale of assets
3 of 18
owners capital
money provided by owners in the business
4 of 18
sale of assets
what a business owns e.g. stock, equipment
5 of 18
retained profit
profit of a company that are not distributed to shareholders as dividends
6 of 18
advantages of internal sources of finance
no interst charges to pay so its cheaper
7 of 18
disadvantages of internal sources of finance
required the business to be profitable in the first place
8 of 18
examples of external sources of finance
loans, overdraft, leasing, trade credit, debentures, money from family/friends, grant
9 of 18
loans
+interest is agreed in advance -bank may require security for the loan
10 of 18
overdraft
+flexible way of borrowing short term money -interest rates are higher than a bank loan
11 of 18
leasing
+dont need lareg sums of money to buy equipment -over a logn period of time leasing is more expensive
12 of 18
trade credit
+dont have to pay for the good for 30-60 days -if not paid early the cost of good can be higher
13 of 18
debentures
+interest fixed for the period of time so easy to budget -failure to pay interst the holder could seize your assets
14 of 18
money from family/friends
+family members may not charge interest -family/friend maybe expected to be involved in the busienss -realtionships may suffer if the business fails and money cannot be paid back
15 of 18
grant
+cost free money from the local authority
16 of 18
share capital
only companies can issue shares
17 of 18
venture capital
venture capatilist more willing to invest in a company as they will share limited liability
18 of 18
Other cards in this set
Card 2
Front
funds found outside the business
Back
external sources of finance
Card 3
Front
owners capital (personal savings) , retained profit and sale of assets
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