3.1 Sources of finance Flashcards
Capital expenditure
To purchase fixed assets: properties and equipment; intended for business operations
Revenue expenditures
Payments for daily operations (direct and indirect costs)
Internal sources
Persona funds - savings, family, friends
Retained earnings - income after taxation and dividends
Sale of assets - selling of dormant or non-performing assets
External sources
Share capital Loan capital Overdrafts Trade credits Grants Subsidies Debt factoring Leasing Venture capital Business angels
Short-, medium-, and long-term
Short (0 - 12 months) Medium term (1-5years) Long term(>5 years)
Share capital
Is a long-term, external source of finance about selling shares of the company
Initial public offer (IPO)
When the share in a limited liability are sold for the very first time.
Lona capital
Borrowing funds from a financier. Like: mortgages, bank loans and overdrafts
Mortgage
Long-term source of loan capital which involves the financier demanding the borrower has a fixed asset
Debenture
Long-term loan capital, secured against a specific asset.
Trade credit
Obtain goods or services from a supplier without having to pay for these immediately
Grants
Financial assistance from the government
Subsidies
Provided in order to encourage output
Debt factoring
A debt factors is a business, such as bank, that takes over the debtors of a business. Debtors are customers who have bought on credit
Leasing
A leasing contract commits the business to pay a monthly fee for a fixed period of time.
