2.1 Raising Finance Flashcards
pro of Retained profit
- free source of finance, no interest
Con of Retained profit
- shareholders may wish to receive it as a dividend
Pro of Sale of Assets
frees up value in unwanted assets
Con of sale of assets
- Business loses benefit of the asset
pro of Owners Capital
Free source of finance - No interest
Con of owners capital
owners could lose personal investment
pro and con of Overdraft
Pro
flexible way to fund, acts as buffer for day to day expenses
Con
High interest rates
bank may ask for repayment any time
Pro and Con of using Trade credit
Pro
Gives opportunity to generate revenue before paying
Con
delays in payments can damage relationship
Pro and Con of Grants
Pro
No debt for small businesses
Con
mainly given for social/environmental benefit
pros and cons of leasing
Pro
assets can be acquired without large capital spending
Con
long term it is more expensive
pro and Con of Bank loans
Pro
can be negotiated to meet business requirements
Con
Business has to pay interest + may offer collateral
Venture Capital Pro and Con
Pro
can bring expertise into the business
Con
owner may not want outside opinion
pro and Con of Share Capital
Pro
access very large amounts with no interest
Con
Only available to Ltd and PLC
pro and Con of Crowd Funding
Pro
Cheap and easy to set up
Con
not suitable for large amounts of money
pros of unlimited liability
Easy decision making
Con of unlimited liability
- personal financial risk
- harder to raise capital
pros of limited liability
- credibility
- no risk of losing personal assets
Cons of limited liability
- reduced control
- accounts publicised
pros of using a business plan
- decision making
- risk identifying
Cons of using a business plan
- may not be accurate
- can make you tunnel-visioned
pros of using a cash flow forecast
informed decision making
better allocation of resources
Cons of using a cash flow forecast
- accuracy limitations (external factors may ruin it)
- time consuming process
how to speed up inflows
- reduce trade credit given to customers
- sell off stock at discounted price
how to slow down outflows
- delay payments to suppliers
- cut costs, find different alternative
