02 Financing Options

Question 1

Private companies

Answer 1

Companies where members of public cannot buy shares for, privately owned and some shares can be owned by employees, or people they have invited to buy shares

Question 2

Public companies

Answer 2

Are listed on NZ stock exchange, members of public can buy shares

Question 3

Trust

Answer 3

Trust document is set up to be able to provide protection to the people within that trust.
Trust is a way of protecting assets.
Reasons to do it: tax - often trust taxes are lower than private taxes.
E.g. family trust - person may own house, but beneficiaries may benefit from that.

Question 4

Advantage of family and friends, as source of long term finance (loa..)

Answer 4

Loan (make sure agreement is made, how and when to pay back, any interest?)

Question 5

Advantage of family and friends, as source of long term finance (shar…)

Answer 5

Dividend obligation? (when borrowing money from shareholder then they are then involved in business)
Who is in charge?

Question 6

Advantage of Banks, as source of long term finance (pay, in..)

Answer 6

Payback terms? (Banks are risk averse. Security: what you tell bank that you will give them if you can’t pay back loan, e.g. house, car or personal guarantee from parents.) Interest rate? Paperwork?

Question 7

Advantage of Finance Companies, as source of long term finance (pay, in..)

Answer 7

Payback terms? (less risk averse than banks/prepared to take on more risk, generally will end up paying back more) Interest?

Question 8

Advantage of Crowdfunding, as source of long term finance (pay, in..)

Answer 8

Loan? Shareholding? Angel investors? Dragons’ Den?

Question 9

NZX (New Zealand Stock Exchange; when company gets big it can be listed on stock exchange, stock exchange: a market for selling and sharing those shares)

Answer 9

Shares? Debt? (company instead of issuing shares can issue bonds)

Question 10

Sources of long-term finance

Answer 10

Fixed-rate business loans, interest-only loans, lease finance

Question 11

Ordinary shares

Answer 11

Main type of share by which companies divide and sell ownership rights to investors

Question 12

Dividend

Answer 12

When company makes profit, profit is owed to owners of business, portion of it is payed back to owner (for sole trader or partnership it is called drawings)