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Business > 3.5 Sources Of Finance > Flashcards

3.5 Sources Of Finance Flashcards

1
Q

What are retained profits

A

Profit from sales invested back into business

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2
Q

What is sale of assets

A

Selling assets no longer used

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3
Q

What is sale of assets and lease back

A

Sell assets and lease the same ones back

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4
Q

What is an overdraft

A

Business allowed to spend money on credit up to a limit

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5
Q

What is debt factoring

A

Selling customer accounts to debt factoring company and paid by company

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6
Q

What is a bank loan

A

Money provided for stated purpose and paid back by interest

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7
Q

What is a mortgage

A

Sum of money borrowed to secure a property and paid back in instalments

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8
Q

What is a debenture

A

Investment to raise money for long term growth

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9
Q

What is venture capital

A

Funds advanced to business in form of a share loan or capital

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10
Q

What is share capital

A

Finance invested as result of sale of shares

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11
Q

What are the advantages and disadvantages of retained profits

A

A: Immediate finance
Nothing to be paid back

D: Only if profitable
Dissatisfied shareholders

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12
Q

What are the advantages and disadvantages of sale of assets

A

A: Quick money
Disposal of unused assets

D: No established credit
Have to negotiate lease contracts

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13
Q

What are the advantages and disadvantages of sale of assets and lease back

A

A: converts assets to capital
D: Tax implications
Have to negotiate lease contacts

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14
Q

What are the advantages and disadvantages of an overdraft

A

A: Quick and easy to arrange
Flexible

D: Can be expensive
Can be retracted form bank

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15
Q

What are the advantages and disadvantages of debt factoring

A

A: Quick cash injection
Reduces risk of bad debts

D: Can impact company’s reputation

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16
Q

What are the advantages and disadvantages of a bank loan

A

A: Large sums available
Monthly repayments

D: Interest has to be paid

17
Q

What are the advantages and disadvantages of a mortgage

A

A: Keep cash reserves
D: Have to pay interest

18
Q

What are the advantages and disadvantages of debentures

A

A: Less costly
Fixed return on secure investment

D: Opportunity costs
High interest possible

19
Q

What are the advantages and disadvantages of venture capital

A

A: Experience and contacts of venture capitalists
Investment in high risk business

D: Not huge amounts of finance available

20
Q

What are the advantages and disadvantages of share capital

A

A: Significant amount of finance available
Don’t have to pay dividends

D: Loss of ownership
Only for plc and ltd

21
Q

What are the 3 internal sources of finance

A

Retained profits
Sale of assets
Sale of assets and lease back

22
Q

What are the 7 external sources of finance

A 
Overdraft 
Debenture 
Share capital
Venture capital 
Bank loan 
Mortgage 
Debt factoring
23
Q

What are the 7 forms of long term finance

A 
Retained profits 
Sale of assets 
Sale of assets and lease back
Mortgage 
Debenture 
Venture capital 
Share capital
24
Q

What are the 2 forms of short term finance

A

Overdraft

Debt factoring

25
Q

Which form of finance can be short or long term

A

Bank loan

Business (4 decks)

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