3.1 Finance for Large Businesses Flashcards
What sources of finance are available for large businesses?
Retained profits - Profit that owners have decided to plough back into the business
Re-invested savings - Using retained profits from previous years to build up bank savings or buy stocks and shares
Fixed Assets - Firms can raise cash by selling fixed assets that are no longer in use
Shares - Businesses can issue more shares and money raised doesn’t have to be repaid to shareholders
Debentures - Another business that owns you money and the firm repays with interest
Loans/Mortgages - Money borrowed from the bank and is repaid with interest
What are the factors that business consider when selecting a source of finance?
Type of Company - Not all have access to all types of finance
Amount of money needed
Length of time the finance is needed for
Cost of the Finance - Some sources are more expensive than others as some have to be paid back with interest
State of the Economy - If interest rates are high, people will be reluctant to invest because of the risks involved
