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Business > business unit 3 > Flashcards

business unit 3 Flashcards

1
Q

internal sources of finance

A
  • Personal funds (for sole traders)
  • Retained profit
  • Sale of assets
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2
Q

external sources of finance

A
  • Share capital
  • Loan capital
  • Overdrafts
  • Trade credit
  • Crowdfunding
  • Leasing
  • Microfinance providers
  • Business angels
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3
Q

short term sources of finance

A

Personal savings
Sale of assets
Overdrafts
Trade credit

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4
Q

long term sources of finance

A

Share capital
Loan capital, such as mortgages
Leasing
Business angels
Microfinance providers
Crowdfunding

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5
Q

Business angels meaning

A

Wealthy and successful private individuals who risk their own money in a business venture that has high growth potential.

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6
Q

Crowdfunding meaning

A

Rising finance for a business venture or project by getting small amounts of money from a large number of people, usually through online platforms.

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7
Q

External sources of finance meaning

A

Finance that comes from outside the organization, usually with the help of a third-party provider, such as a bank, business angel, venture capitalist or government.

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8
Q

Initial public offering (IPO)

A

Finance raised by a public limited company when it issues (sells) shares for the very first time on a stock exchange.

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9
Q

Internal sources of finance

A

Finance that come from within the organization, from its own resources and assets without the help of a third-party provider.

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10
Q

Leasing meaning

A

This financial service enables businesses to have access to non-current assets, by hiring these assets, but without the high costs of capital expenditure.

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11
Q

Loan capital meaning

A

Also known as debt capital, this refers to borrowed funds from financial lenders, such as commercial banks.

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12
Q

Long-term finance meaning

A

Refers to sources of finance of more than five years, for the purchase of long-term fixed assets or to fund the growth of a business in overseas markets.

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13
Q

Microfinance meaning

A

An external source of finance provided by financier who support entrepreneurs of small businesses, especially females and those on low incomes who are ordinarily unable to secure loans from commercial banks.

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14
Q

Overdraft meaning

A

A banking service that enables customers (personal and business customers) to withdraw more money from their account than exists in the account.

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14
Q

Microfinance providers meaning

A

Refers to the financiers or organizations that lend small amounts of money to entrepreneurs of small businesses, especially females and business owners on very low incomes.

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15
Q

Personal funds meaning

A

Internal source of finance, with entrepreneurs using their own savings, usually to finance their start-up business.

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16
Q

Retained profit meaning

A

This is the surplus funds that are reinvested back in the business, rather than being distributed to the owners.

17
Q

Revenue expenditure meaning

A

Refers to business spending on its everyday and regular operations, e.g. spending on wages, raw materials and bills.

18
Q

Sale and leaseback meaning

A

This is a hybrid financial strategy that involves a business divesting its tangible non-current assets and subsequently entering into a lease agreement to regain access to and use of these assets.

19
Q

Sale of assets meaning

A

An internal source of finance that involves the firm selling existing items of value that it owns.

20
Q

Share capital

A

Also known as equity capital, this is finance raised through the issuing of shares via a stock exchange (or stock market).

21
Q

Share issue

A

The process involving a public limited company selling additional shares in order to raise finance.

22
Q

Short-term finance meaning

A

Refers to sources of finance needed for the day-to-day running of the business, i.e., revenue expenditure.

23
Q

Stock exchange meaning

A

A highly regulated marketplace where individuals and businesses can buy and sell shares in public limited companies.

24
Q

Trade credit meaning

A

Financial service that enables a business customer to purchase and obtain goods and services but to pay for these at a later date.

25
Q

Capital expenditure

A

Refers to business spending on fixed assets or capital equipment of a business.

26
Q

Finance

A

Refers to the various available money that an organization has to fund its business activities.

27
Q

Revenue expenditure

A

Refers to business spending on its everyday and regular operations.

28
Q

Average costs

A

This is the cost per unit of output. It is calculated by the formula: AC = TC ÷ Q where:

AC = Average cost

TC = Total cost, and

Q = Quantity of output

29
Q

Average revenue

A

This is the amount a business receives from its customers per unit of a good or service sold. Mathematically, AR = TR ÷ Q = P where:

AR = Average revenue

TR = Total revenue

Q = Quantity of output, and

P = Price

30
Q

Costs

A

The charges that an organization incurs from its operations, e.g., rent, wages, salaries, and insurance.

31
Q

Direct costs

A

Costs that are clearly associated with the output or sale of a certain good, service or business operation, e.g., raw materials.

32
Q

Fixed costs

A

Costs that do not change with the level of output, e.g., loan repayments and management salaries.

33
Q

Indirect costs

A

Also known as overhead costs, these costs are not easily identifiable with the sale or output of a specific good, service or business operation.

34
Q

Price

A

Also known as average revenue, this is the amount of money a product is sold for.

35
Q

Revenue

A

The money (income) received by a business from the sale of goods and/or services.

36
Q

Revenue stream

A

The different sources of revenue (or income) for a business, e.g., revenue from sponsorship deals, merchandise sales, membership fees and royalties.

37
Q

Total costs

A

This refers to the aggregate amount of money spent on the output of a business. The formula is: TC = TFC + TVC where:

TC = Total costs

TFC = Total fixed cost, and

TVC = Total variable cost.

38
Q

Total revenue

A

This is the sum of income received by a business from its trading activities. It is calculated using the formula: TR = P × Q.

39
Q

Variable costs

A

Costs that change with the level of output - they rise when output or sales increase, e.g., raw materials and packaging costs.

40
Q

Assets

A

The possessions owned by a business, which have a monetary value, e.g., buildings, land, machinery, equipment, inventories, and cash.

41
Q
A

Business (6 decks)

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