Chapter 15 Financing growth Flashcards
Chapter 15
How can a business be financed from external sources?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
External sources of finance come from outside the business and include loans, overdrafts, share capital and trade credit.
Chapter 15
How can a business be financed from internal sources?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Internal sources of finance come from within the business and include retained profit and sale of assets.
Chapter 15
What is meant by a stock market flotation?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Share issue is a long and complicated process and new firms rarely do this to raise finance.
However, stock market floatation is when you change your company from a private limited company (Lt) to a public limited company (plc.) by selling shares via the stock market.
This means instead of only being able to sell shares privately, they can be sold to anyone, but you can no longer control who buys the shares.
Chapter 15
What is meant by Bank loan?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Money borrowed from a bank and repaid over a period of time at a fixed rate. Suitable for longer-term financial requirements
Chapter 15
What is meant by Bonds?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Long term loans normally between 5 and 25 years. The money is borrowed from a variety of places such as banks, pension funds, insurance companies and private investors. These people get paid a fixed rate of interest over the lifetime of the loan (usually every year), but they can be traded on the bond (stock) market. The loan is repaid at the end of the term.
Chapter 15
What is meant by Equity or share capital?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
The monetary value of a business that belongs to the business’ owners. In a company (ltd or plc. only), this would be the value of their shares
Chapter 15
What is meant by External sources of finance?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Finance which is obtained from outside the business such as an overdraft, bank loans, the issue of bonds, trade credit (all forms of debt) and cash from the issuing of new shares
Chapter 15
What is meant by Financing a business?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
How a business obtains money and other financial resources to start up, expand and if necessary pay off any losses it has made. Can be from internal or external sources
Chapter 15
What is meant by Internal sources of finance?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Finance which is obtained within the business such as retained profit or the sale of assets
Chapter 15
What is meant by Overdraft?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Money borrowed from a bank by drawing more money out that is actually in a current account. Suitable for short-term, to cover fluctuations is cash-flow
Chapter 15
What is meant by Public Limited Company (plc.)?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
A company whose shares are sold on the stock exchange
Chapter 15
What is meant by Retained profit?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
Profit which is kept back in the business and used to pay for investment in the business
Chapter 15
What is meant by Share capital or equity?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
The monetary value of a business that belongs to the business’ owners. In a company (ltd or plc. only), this would be the value of their shares
Chapter 15
What is meant by Shares?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
A share is a part of a company. If a company has shares of £1 each and you have invested £2000, then you own 2000 shares and you are now a shareholder. Equally if you have a shareholder owning 25% of the shares, they own a quarter of the business.
Chapter 15
What is meant by Trade credit?
Edexcel 2BS01 Business Studies GCSE Unit 3.3
This is a type of finance given by suppliers. This is when they sell your business the goods, and then they send you a bill (called an invoice) to pay for the goods at a later date. Usually this is 30 days, but can be more
