3.2 - Sources of finance

Question 1

extremely wealthy individuals who risk their own money by investing in small/medium businesses that have high growth potential

Answer 1

business angels

Question 2

practice of raising finance for a business venture or project by getting small amounts of money from a large number of people

Answer 2

crowdfunding

Question 3

funds from outside of the organization, such as through debt, share capital and business angels

Answer 3

external sources of finance

Question 4

business converting its legal status to a public traded company by selling its shared on a stock exchange

Answer 4

initial public offering (IPO)

Question 5

funds generated from within the organization, through personal funds, retained profits, sale of assets

Answer 5

internal sources of finance

Question 6

a lessee pays rental income to hire assets from a lessor, the legal owner of the assets

Answer 6

leasing

Question 7

medium-long term sources of finance with interest, from commercial lenders. (mortgages, business development loads, debentures)

Answer 7

loan capital/debt capital

Question 8

funds available for any period of more than 12 months from the accounting period, used to purchase fixed assets or finance expansion

Answer 8

long-term sources of finance

Question 9

finance service aimed at entrepreneurs of small businesses, like females or low incomes

Answer 9

microfinance

Question 10

allow a business to spend in excess of the amount in its bank account, up to a pre-determined limit. this is the best form to borrow for short term

Answer 10

overdrafts

Question 11

source of interal finance, referring to the use of entrepreneur’s own savings

Answer 11

personal funds

Question 12

value of surplus that a business keeps to use within the business after paying taxes and dividends

Answer 12

retained profit

Question 13

selling existing items of value that the business owns, like dormant (unused) assets, and obsolete (outdated) assets

Answer 13

sale of assets

Question 14

money raised from selling shares in a limited liability company

Answer 14

share capital

Question 15

existing publicly held company sells more of its share to raise finance

Answer 15

share issue (share placement)

Question 16

available for a period of less than one year, usually used to pay for the daily/routine operations of the business, like overdrafts and trade credit

Answer 16

short term sources of finance

Question 17

highly regulated marketplace where people can buy/sell shares

Answer 17

stock exchange

Question 18

allow a business to postpone payment or to ‘buy now and pay later’. credit provider doesn’t receive any cash from the buyer until a later date (30-60 days)

Answer 18

trade credit