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Business | Theme 2 > 2.1 Rasing Finance > Flashcards

2.1 Rasing Finance Flashcards

1
Q

Name all of the Methods of Raising external finance

A

Loans, Share Capital, Venture Capital, Overdarfts, Leasing, Grants, Trade Credit

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2
Q

What are the Advantages of Retained Profit

A

No interest to pay

Does not have to be paid back

No dilution of shares

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3
Q

What are the Disadvantages of Retained Profit

A

Shareholders may have reduced dividends

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4
Q

What are the advantages of Sale of Assets

A

No interest to pay

Does not have to be paid back

No dilution of shares

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5
Q

What are the disadvantages of Sale of Assets

A

Once sold, gone forever

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6
Q

What are the Advantages of Share Capital

A

No Interest to pay

Does not have to be paid back

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7
Q

What are the disadvantages of Share Capital

A

Dilution might upset existing shareholders

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8
Q

What are the advantages of Loans

A

No Dilution of Shares

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9
Q

What are the disadvantages of Loans

A

Interest Payments

Set Manturity Date

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10
Q

What are the advantages of Overdraft

A

Quick and easy to set up and very flexible

Intrest paid only on amount overdrawn

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11
Q

What are the disadvantages of Overdraft

A

Intrest payments higher than for a loan

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12
Q

What are the advantages of Leasing

A

Improves cash flow

regular fixed payments provide certainty

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13
Q

What are the advantages of Trade Credit

A

Eases cash flow

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14
Q

What are the disadvantages of Leasing

A

Expensive

Can be a long term commitment

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15
Q

What are the disadvantages of Trade Credit

A

If late paying, can damage credit history

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16
Q

What are examples of Unlimited Liability

A

Sole Traders

Partnerships

17
Q

What is an example of Limited Liability

A

Private Limited companies

Public Limited companies

18
Q

tedt

A

Owners’ Capital

Loans and Overdrafts

Trade Credit

Leasing

19
Q

What is an example of Limited Business

A

Share Capital

Loans and Overdrafts

Angel and Venture Capital

Trade Credit

Leasing

Crowdfunding

20
Q

Explain the importance of a Business Plan

A

Can be used to judge success

Gives consideration to potential problems

Provides a sense of direction

Provides Clear Targets

21
Q

What are the key contents of a business plan

A

Business Model

Product and Market Planning

Market Assessment

Financial Forecasts and Scenarios

Key Opportunities and Threats

Investment Requirements

22
Q

Explain the what cash flow can do

A

cash flow is dynamic and unpredictable

cash flow problems are the main reason why a business fails

23
Q

What is a cash flow forecast

A

Shows the movement of money into and out of a business over time and is an estimate

23
Q

What are some examples of Cash Inflows

A

Cash Sales (Turnover/ Revenue)

Receipts from Trade debtors

sale of fixed assets

Interest of Bank Balances

Grants

Loans from Banks

Share Capital Invested

24
Q

What are some examples of Cash Outflows

A

Payment to suppliers

wages and salaries

payments for fixed assets

tax on profits

interest on Loan + Overdraft dividend paid to Shareholders

repayment of Loans

25
Q

What are some of the Benefits of cash flow forecasts

A

early identification of problems

identification of and chasing of slow- paying customers

Control of stock

Target Setting and motivation for those involved

26
Q

Name some External Sources of Finance?

A

(Outside the business)

  • Family and Friends
  • Banks
  • Peer to Peer Lending
  • Business Angles
  • Crowdfunding - raising money from a large number of people usually from the internet.
  • Other Businesses
27
Q

What are some of the Limitations of cash flow forecasts

A

Depends on the accuracy of the figures

May limit flexibility

28
Q

List some Internal Sources of Finance?

A

Owner’s Capital

Selling Assets

Retained Profits

29
Q

What is a Unlimited Liability

A

the business and the owner(s) are seen as one under the law

means business debts become the personal debts of the owners

30
Q

What is a Limited Liability

A

means that the owners aren’t personally responsible for the debts of the business

the shareholders of both private and public limited companies have limited liability

31
Q

How does Liability affect sources and methods of finance?

A

Business with Limited Liability usually find it much easier to encourage people to invest

Sole - traders and partnerships are likely to rely on internal sources of finance

Limited Companies have lots of finance via share capital.

Business | Theme 2 (5 decks)

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