C2 - Types of Capital Income

Question 1

What is capital income?

Answer 1

It’s the money invested in the business by investors/owners of the business, used to buy assets or set up the busness.

Question 2

What are loans?

Answer 2

• Money given from bank
• Returned with interest
• Monthly payments must be repaid regardless of whether business makes profit or not

Question 3

What are mortgages?

Answer 3

• Loan, for 25+ years, to buy property, land of premises like factories
• Secured against value of asset until paid off
• If you can’t keep up with repayments, lender can repossess place and sell it

Question 4

What are shares?

Answer 4

• Shareholders are owners of the business and usually receive voting rights
• They receive income in a form of dividends if the business is profitable

Question 5

What is owner’s capital?

Answer 5

• Owner funds business through their own personal savings

Question 6

What are debentures?

Answer 6

• A medium to long-term loan that a corporate or government raises from the public for capital requirements & has lower interest rates and longer repayment dates.