Business Finance Flashcards
Role of finance department
Record financial transactions
Prepare final accounts
Produce accounting information
Forecast cash flows
Make important financial decisions
Why business need finance
When
Starting up a business
Expansion of an existing business
Additional working capital
Start up capital
Finance needed by a new business for essential non current and current assets before it can begin trading
Working capital
Finance needed by a business to pay its day to day expenses/costs
Capital expenditure
Money spent on non current assets which will last for more than one year (Buildings)
Revenue expenditure
Money spent on day to day expenses which dont involve the purchase of a long term assets. (Wages)
Sources of finance
Internal finance OR External finance
Short term finance OR Long term finance
Internal finance
Obtained from within the business itself
External finance
Obtained from sources outside of and separate from the business
Internal sources of finance
Retained profit
Sale of existing assets
Sale of inventories
Owners savings
External sources of finance
Issue of shares
Bank loans
Debentures
Factoring of debts
Grants and subsidies
Micro finance
Crowd funding
Microfinance
Providing financial services (small loans) to poor people not served by traditional banks
Crowd finding
Funding a project or revenue by raising money from large number of people who each contribute a small amount
Short term sources of finance
Overdrafts
Trade credits
Factoring of debts
Long term sources of finance
Bank loans
Hire purchase
Leasing
Issue of shares
Long term loans/debt finance
Debentures
