2.1.2 External Finance Flashcards

1
Q

Bureaucracy:

A
  • system of government

- important decisions = state officials not elected representatives.

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2
Q

Social enterprise:

A

-specific social objectives = serve its primary purpose.

  • seek to maximize profits while maximizing benefits to society & environment.
  • profits are principally used to fund social programs.
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3
Q

Source of finance:

A

WHERE the finance is coming from

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4
Q

6 external sources of finances:

A
  1. Business angels
  2. Crowd funding
  3. Other businesses
  4. Family & friends
  5. Banks
  6. Peer to peer funding
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5
Q

Method of finance:

A

HOW the finance is provided

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6
Q

7 external methods of finance:

A

1.Overdrafts
2.Grants
3.Loans
4.Share capital
5.Venture capital
6.Donations
7.Leasing
Trade credit

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7
Q

Venture capitalist:

A

Risk seeking investor or a large scale business

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8
Q

Business angels:

A

Wealthy individuals - finance - equity (take risks)-business plan
+advice/contacts

-lose equity = less profits = less control

Any small-medium Ltd

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9
Q

Peer to peer funding:

A

other business owners individuals lend money = interest
+ quick access, relationships

-not large amounts, interest

Established businesses

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10
Q

Collateral/security:

A
  • asset
  • investor/bank takes ownership
  • until the finance is payed back
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11
Q

Family / friends

A

Loans/gifts from those known
+ no repay (interest), flexible, similar objectives

-limited, pressure on relationship

Start up/small

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12
Q

Banks loans;

A

Borrowing fixed repayment (collateral)
+large amount, predictable repay

-risk assets, interest

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13
Q

Banks overdraft

A

Pre arranged spend more than have in current account
+flexible, use when need

-high interest

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14
Q

Crowd funding

A

Via internet video online small investors
+reward if donate, way of money

-may not raise enough

Start up with social benefit

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15
Q

Other businesses

A

Those with healthy cash balance invest

+easy to raise and less bureaucracy

-risk ownership

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16
Q

Debt finance

A

Business raises money by borrowing
E.g. loans, overdraft, trade credit, peer-peer lending

+ve: Expand quickly & raise money , Less risky
-ve: interest, Lack of control

17
Q

Highly geared

A

Borrow too much money over 50%

18
Q

Equity finance

A

Finance from selling shares or control of business

19
Q

Plc

A

Public limited company
Share/sell stocks on stock market
Anyone (competition?)
May not get price wanted

20
Q

LTd

A

Private limited company

Share to family and friends

21
Q

Flotation

A

Changing from a private limited company to a Plc

22
Q

Share capital/Equity finance/capital:

A

Capital from selling/issuing shares
+dividends if there is profit, raise large amounts, no interest

-ownership, control, complex process

Incorporated business

23
Q

Venture capital (private equity finance)

A

From establish business to another for %equity
+large amount, expertise, expansion

-ownership, conflict, initially expensive

Small risky business

24
Q

Leasing

A

Benefit of asset not buying it
+avoid financing it, leasing = repairs covered, trade to latest model
-don’t own it, more costly in long run

Many businesses

25
Trade credit
Pay suppliers period of time after goods/services received +boost day-day finance -lose out on discount for immediate repayment
26
Grants
Fixed capital provided by government +employment, support cause -
27
Factors influencing choice of SOF
1. amount 2. advice/expertise 3. established/ profitable 4. quick/time 5. type of business (legal structure) 6. cost of finance 7. what is it being used for
28
Legal structure
Type of business
29
debt factoring
selling your debt, give 80% of cash | company chases receivables (keeps 5-10% of capital)
30
fixed assets
non current assets