Business Methods Of Finance

Question 1

Bank loan uses

Answer 1

• a sum of money borrowed by a customer or business from a bank, often for a specific purpose
• expanding
• buying more stoke

Question 2

Pro bank loan

Answer 2

• positive interest rates for a small business
• quick to access
  -bank want interfere
• long loan terms

Question 3

Cons bank loans

Answer 3

• the eligibility criteria can be strict
• amount is not guaranteed
• must pay interest

Question 4

Ordinary share capital

Answer 4

• the sum of money raised by a corporation from private and public sources through the issue of is common
• money raised by selling shares
• high confidence so limited company has low risk of running out of money

Question 5

Pro ordinary share capital

Answer 5

• no need for repayment
• greater levels of credit worthiness
• financial flexibility
• ow risk of bankruptcy

Question 6

Con share capital

Answer 6

• diminished conrol and ownership
• share dilution
• public disclosure of financial info
• lack of ax deductibility
• greater ask for shareholders

Question 7

Gov grants and uses

Answer 7

• local authority funds a project to provide public support or stimulate economy
• start up business

Question 8

Pro gov grants

Answer 8

• don’t have to return money
• may come with free publicity
• most funding available
• large amounts of data

Question 9

Con gov grants

Answer 9

• very specific eligibility
• can have strings attached
• competition for grants high

Question 10

Venture capital uses

Answer 10

• private financing where investors provide to start up business or help a small business

Question 11

Pro venture capitalist

Answer 11

• potential long term growth
• no repayment
• support

Question 12

Con venture capitalist

Answer 12

• giving away shares
• hard to get right deal
• distractions

Question 13

Overdrafts

Answer 13

• borrowing money by taking out more money than you have in your account

Question 14

Pro overdraft

Answer 14

• you can borrow up what you need
• any be flexibility when paying back

Question 15

Con overdrafts

Answer 15

• have to pay interest
• going over, overdraft limit may negatively affect your credit score

Question 16

Crowdfunding

Answer 16

• a project by raising money from a league no. Of people is internet
• purchase new equipment for company raising money to finance projects

Question 17

Crowdfunding pro

Answer 17

• low risk
• fast method of raising finance
• can get feedback and improve idea
• investors can become customers
• increases brand awareness

Question 18

Cons crowdfunding

Answer 18

• may not reach funding goal
• no guarantee of success
• spend time promoting campaign

Question 19

Lease

Answer 19

• a way renting an assets that a business requires
• monthly payments made
• new equipment

Question 20

Pro lease

Answer 20

• balance cash outflow
• quality assets
• better use age of capital

Question 21

Con lease

Answer 21

• no ownership
• lease expenses
• debt

Question 22

Trade credit uses

Answer 22

• agreement to buy goods and services on account without ming immediate cash
• buying materials and construction trade

Question 23

Pro trade credit

Answer 23

• easy to set up
• buy and pay later so can sell before pay

Question 24

Con trade credit

Answer 24

• if payment late may damage reputation

Question 25

Limited liability

Answer 25

- don’t sell an assets to pay off businesses debts - owners have separate legal identity to business so own separate assets - can use ordinary share capital to sell shares to help pay off debts

Question 26

Unlimited liability

Answer 26

- sole traders and partnerships - sell own assets to pay off debts - use bank loans to try and pay off debts