20. Business finance Flashcards
Sources of finance
Internal
External
Internal sources of finance
Personal savings/owners funds
Retained profit
Sale of assets
External sources of finance
Share capital Loans/mortgage Overdraft facilities Hire purchase Grants
Long term finance
Repaid over a long period of time (roughly 5-25 years)
Long term finance sources
Owners own capital/savings Share capital Loans Mortgages Retained profit Leasing Grants
Short term finance
Money that may have to be paid immediately or fairly quickly (1-5 years)
Short term finance sources
Bank overdraft
Cash flow
A business needs sufficient inflows of cash to finance its day-to-day outgoings
Inflows
Money received by the business
Outflows
Refers to money paid out by the business
Inflows examples
Sales revenue
Capital
Loans
Grants
Outflows examples
Purchases
Rent & rates
Wages & salaries
Owners capital (funds)
Owner uses their savings and puts money into business
A sole trader will usually start up a business with their own savings
Share capital
A share in the business is sold to an individual or another business
Venture capitalist
A person or company who buys shares in a business that they hope will grow fast
e.g. Dragons Den