2.1 Flashcards
what is internal finance
finance sustained from within the business
what are the 3 types of internal finance
- owners capital
- retained profit
- selling assets
what is external finance
finance sustained from outside the business
what are the 7 types of external finance
- loans
- share capital
- overdraft
- leasing
- trade credit
- grants
- venture capital
what are the 6 sources of finance
- family and friends
- banks
- business angles
- crowd funding
- other businesses
- peer to peer funding
what does the choice of which finance depend on
- do you need to pay it back
- do you pay interest
- do you lose equity
- do you gain advice
- can you raise enough
what is unlimited liability
business and owner have same legal identity
what is limited liability
business and owner have different legal identity
which sources of finance are appropriate for a business with unlimited liability
- owners capital
- loan
- trade credit
- retained profit
which sources of finance are appropriate for a business with limited liability
- owners capital
- lease
- trade credit
- retained profit
- crowdfunding
- venture capital
- share capital
what is a cashflow forecast
prediction of the money coming n and out of the business
why do a cashflow forecast
- checks viability of business
- helps organisation
- help prove for a loan
- helps arrange for sources o finance
what are the main 2 cash flow forecast calculations
net cash flow = inflows - outflows
closing balance = net cash flow + opening balance
what are the 5 limitations of a cash flow forecast
- not always accurate
- depends on other external economic factors
- trends can change unpredictably
- false sense of security
- its only a forecast
