2.1 Raising Finance

Question 1

Owner’s Capital

Answer 1

Personal savings invested into business. Also known as owner’s equity.

Question 2

Retained Profits

Answer 2

Profits reinvested into business rather than being paid to owners and shareholders

Question 3

Sales of Assets

Answer 3

Sell obsolete assets or use sale and leaseback

Question 4

Peer-to-Peer Lending

Answer 4

Individuals or firms lend money to people usually through online exchange website w/ no interest payments

Question 5

Crowdfunding

Answer 5

Large number of people fund a project, each making small investments and business gives away equity

Question 6

Business Angels

Answer 6

Entrepreneurial individuals who provide equity / capital in return for share

Question 7

Loans

Answer 7

Arrangement where amount borrowed must be repaid in a given period in regular instalments

Question 8

Share Capital

Answer 8

Funds raised by issuing shares

Question 9

Venture Capital

Answer 9

Capital invested into a business with substantial element of risk e.g business angels

Question 10

Bank Overdraft

Answer 10

Agreement of a sum of money in which the business can spend more than it has in the bank

Question 11

Leasing

Answer 11

Renting the use of an item

Question 12

Trade credit

Answer 12

Supplier allows a payments at a later date

Question 13

Grants

Answer 13

Firms can sometimes qualify for a sum of cash that does not have to be repaid e.g located in high unemployment then they may be given a grant as they will be employing staff bringing down unemployment figure