6. Finance Flashcards
Entrepeneur
Someone who is willing to take the risks involved in starting a new business
Things an entrepreneur will need to spend money on in order to start a business?
Renting or buying a building, Vehicles, Advertising the business, Equipment and machinery for the business, Inventories of raw materials
Inventories
Raw materials that have not yet been used or products that have been made, but not sold. These are also called stocks.
Reasons why an established business would need to raise finance
To expand, improve effciency, develop new products
Internal source of finance
Money that is available from within the business, for example, retained profits from previous years
Owners’ funds
money put into a business by its owner or owners
Interest
A payment made in order to borrow money. It means a business pays back more than it borrows
Shareholder
A person or organisation that owns part of a company. Each shareholder owns a ‘share’ of the business
Assets
Something that is owned by a business. Examples include land, buildings, vehicles and machinery
Trade Credit
A period of time which suppliers allow customers before payment for supplies must be made
External source of finance
Refers to money that comes from outside the business, for example, a loan from a bank
Collateral
An asset that a bank holds as security for the repayment of a loan
Mortgages
Loans from banks and building societies that are used to buy land and buildings, such as offices and shops
Building societies
Organisations that offer a range of financial services. However, their major business is providing savings accounts and lending money for the purpose of buying poverty
Overdraft
A flexible loan which business can use, whenever necessary, up to an agreed limit
Sources of finance
Retained profits, selling assets, bank loans and mortgages, selling shares, goverment grants
Grant
A sum of money given to an entrepreneur or a business for a specific reason.
Cash flow
The money that flows into and out of a business on a day-to-day basis
Government grants
The goverment encourages people to start to expand businesses because this creates jobs. They can offer a range of grants. The garnts will only cover part of the money needed. Most grants do not have to be repaid
Cash inflow
Money flows into a business and becomes available to it
Reasons why a business might receive cash inflows
Income from sales, loans from banks, money invested by the business’s owners
Cash outflow
When a business makes a payment, it causes an outdlow of cash