A-level Business Studies Lesson 33 (3.5.3)

Question 1

Internal sources of finance

Answer 1

Ways of raising finance from within the business, such as retained profit.

Question 2

External sources of finance

Answer 2

Ways of raising finance from outside the business, such as a bank loan.

Question 3

Factoring

Answer 3

When a factoring company (usually a bank) buys the right to collect the money from the credit sales of a business (where customers of a business are allowed to delay payment to that
business).

Question 4

Bank overdraft

Answer 4

When a bank allows an individual or organisation to overspend its current account in the bank up to an agreed overdraft limit
and for a stated period of time.

Question 5

Retained profits

Answer 5

The part of a firm’s profit that is reinvested in the business rather than distributed to shareholders.

Question 6

Ordinary share capital

Answer 6

Money given to a company by shareholders in return for a share certificate that gives them part ownership of the company and entitles them to a share of the profits.

Question 7

Loan capital

Answer 7

Money received by an organisation in return for the organisation’s agreement to pay interest during the period of
the loan and to repay the loan within an agreed time.

Question 8

Venture capital

Answer 8

Finance that is provided to small - or medium-sized businesses that seek growth but which may be considered as risky by typical share buyers or other lenders.