2.1 Raising finance Flashcards
What is a limited liability
Business partners are only liable for the amount of money they put into the company
What is an unlimited liability
A business owner is personally responsible for the debts and liabilities of the business
Venture capital
Finance obtained from people or businesses who like to invest in small/medium sized firms for a share of the business
Factoring
Where a business sells a debt to someone and pays a fee for that person to collect it on their behalf
Overdraft
Flexible source of finance mainly used to ease short term cash flow problems. Good for seasonal business
Trade credit
Where a supplier allows you to purchase goods and pay the amount later
What is retained profit?
Profit that is made and then reinvested into the business
What is crowd funding?
When you do something to get people to donate money to you
How do you work out total net cash flow?
Net cash flow = Total in flow - Total outflow
How do you work out closing balance?
Closing balance = Opening balance + Net cash flow
Benefits of a cash flow forecast
- Shows a business when cash is available and when it’s not
- Helps negotiate for things like trade credit and bank loans as proves they have cash
- Helps a business plan it’s investments
Problems with cash flow forecast
- Sales may be lower than expected
- Costs may be higher than expected
- Figures not always accurate
