2.1 Raising Finance

Question 1

What are the two types of internal spending?

Answer 1

Capital and revenue expenditure

Question 2

What is capital expenditure

Answer 2

Large sums of spending on one off items that are long term

Question 3

What is revenue expenditure

Answer 3

Day to day spending on day to day running

Question 4

What are the 3 types of internal finance

Answer 4

Owners capital-personal savings
Retained profit
Sale of assets

Question 5

What are the advantages of owners capital personal savings

Answer 5

No interest
Quick
Maintain control

Question 6

What are the disadvantages of owners capital personal savings

Answer 6

Not enough
Could lose personal investment

Question 7

What are the advantages of retained profit

Answer 7

No interest
Keep control

Question 8

What are the disadvantages of retained profit

Answer 8

Shareholders may want back in dividends
Reduces security blanket

Question 9

What are the advantages of the sale of assets

Answer 9

Can invest into other areas

Question 10

What are the disadvantages of the sale of assets

Answer 10

Might not get full market value
Might need it in future
Unsuitable for start ups

Question 11

What are the external SOURCES of finance

Answer 11

Family and friends
Peer to peer lending
Banks
Government
Business angels
Crowdfunding
Other business

Question 12

What are the external METHODS of finance

Answer 12

Loans
Share capital
Venture capital
Overdraft
Leasing
Trade credit
Grants
Donations