ways of raising finance from within the business , such as retained profit or debt factoring
1 of 19
external sources of finance
ways of raising finance from outside the business, such as loans and overdrafts
2 of 19
define short term finance
finance that is normally intended for repayment within 12 months
3 of 19
define long term finance
finance that is normally intended for capital expenditure and where repayments is due after three years or more
4 of 19
define Overdraft
- external source of short term finance
- when an bank allows an individual or organisation to overspend its current account in the bank for an agreed limit and time
5 of 19
advantages and disadvantages of overdraft
+ :
quick access
allows emergency purchases
-:
high interest rates
is only a short term solution
6 of 19
retained profit
internal source of long term finance
- the part of a firms profit that is reinvested in the business rather than distributed to shareholders
7 of 19
advantages and disadvantages
+ :
quick and convenient
easy access to the money
no interest payments to make
-:
once the money is gone, it is not available for any future unforeseen problems the business might face
8 of 19
original share capital
money given to a company by shareholders in return for a share certificate that gives them part ownership of the company and entities them to a share of the profits
( external sources and longterm finance )
9 of 19
advantages and disadvantages of chare capital
+: limited liability encourages to invest
its not necessary to pay dividend
-: loss of control for original owners
possible high dividend payment
10 of 19
define a bank loan
(- external long-term finance )
- a sum of money provided to a firm or on individual by a bank for a specific, agreed purpose
11 of 19
advantages and disadvantages
+: easy and quick to access
can get a significant amount of money at one time
-: have to pay interest
difficult for a new business to access
12 of 19
venture capital
finance that is provided to small or medium sized firms that seek growth but which may be considered as risky by typical investors .
13 of 19
advantages and disadvantages for venture capital
+: potential to raise huge amount of money
venture capitalist can offer advice and help
-: owner must give away part of the business
they may have a different vision for the business than the owner does
14 of 19
sales and lease back
immediate cash can be a quired by selling off a property the business owns and then renting it back from the new owners
15 of 19
crowdfunding
getting small sums of finance from a large amount of people
external short term
16 of 19
sale of assets
selling products owned by the business. This may be used when either a business no longer has a use for the product or they need to raise money quickly
( internal , long-term)
17 of 19
peer to peer lending
is a way of renting an asset that the business requires, such as a coffee machine. Monthly payments are made and the leasing company is responsible for the provision and upkeep of the leased item
( external source
18 of 19
debt factoring
a short term source of finance where firms
sell their invoices to a factor such as bank
19 of 19
Other cards in this set
Card 2
Front
external sources of finance
Back
ways of raising finance from outside the business, such as loans and overdrafts
Comments
No comments have yet been made