5.1 Finance Needs and Sources

Question 1

Capital Expenditure

Answer 1

Money spent on the purchase/acquisition of non-current assets such as premises or machinery.

Preferred - long-term finance

Question 2

Revenue expenditure

Answer 2

Money spent on day to day costs

Question 3

Venture Capital

Answer 3

Funding for businesses start-ups and small businesses with exceptional growth potential

Question 4

Fixed Capital

Answer 4

Money invested in non-current assets with long productive lives including premises, machinery and vehicles

Question 5

Working capital

Answer 5

Money available to a business to finance day to day operations or running’s cost

Question 6

Short-term finance

Answer 6

Funds available to a business for upto a year or so, usually to fund opening expenditures

Question 7

Long-term finance

Answer 7

Funds available for a business over many years, usually for investments in non-current assets

Question 8

Internal sources of Finance

Answer 8

Capital that a business can raise from its own resources

Question 8

Retained profit

Answer 8

Profit saved by a business for reinvestment that is not returned to the owners as dividends

Question 9

Mortgage

Answer 9

Long term loan to buy property

Question 10

Trade Credit

Answer 10

Short term finance provided by a supplier to a business customer. The customer will often have 30-90 days

Question 11

Hire Purchase

Answer 11

Paying for non-current assets in installments. The supplier

Question 12

Liquid asset

Answer 12

Immediately available for spending

Eg - Cash

Question 13

External source of finance

Answer 13

Money raised from ppl or organisation who r not part of a business

Question 14

External sources eg

Answer 14

Goverment grants
Debt factories
Overdrafts
Bank loans
Debentures(shares that only double not fluctuate)
Venture capital (shark tank)
Sponsorships
Leasing