3.5.3 Making financial decisions: sources of finance Flashcards
A source of finance
This refers to the way in which a business raises the finance that it needs for some activity
Internal source of finance
This is one that exists within the business
An external source of finance
This is an injection of funds into to the business from individuals, other businesses or financial institutions
Debt factoring
This is where businesses buy the customer bills from a business and offer immediate cash in return for a percentage cut
An overdraft
This exists when a business is allowed to spend more than is in their account up to an agreed limit
Retained profits
This is the profit that is made by the business that is kept and can be reinvested back into the business
A bank loan
This is an amount of money provided to a business for a stated purpose in return for a payment in the form of interest charges
Share capital
This is finance invested into a company as a result of selling shares in the business
Venture capital
These are funds given to businesses to be relatively high risk in the form of share or loan capital
Short-term finance
This is finance needed for a limited period of time, normally less than one year
Long-term finance
These are those sources of finance that are needed over a longer period of time, usually over a year