Chapter 15 (Sources of finance) Flashcards
Business angels
Wealthy people who take risks by investing in small/medium sized businesses that they think have potential
Crowdfunding
Getting small amount of money from a large number of people (Gofundme)
External sources of finance
Funds from outside of the organization
Initial public offering (IPO)
The money a business makes by becoming a publicly traded company by floating in a stock market for the first time
Internal sources of finance
Funds generated within the organization
Leasing
A lessee pays installments for assets from the lessor (who is the legal owner of the asset)
Loan capital
(aka Debt capital) Interest bearing finance obtained from commercial lenders (banks)
Long-term sources of finance
More than a year, usually for the expansion of a business
Microfinance
A service aimed to entrepreneurs of small businesses (especially poor females)
Overdrafts
Allowing businesses to spend more than they have in their bank account
Personal funds
Using an entrepreneur’s own savings
Retained profit
The money a business keeps from their profit after paying taxes and dividends
Sale of assets
Selling existing items of value that the business owns
Share capital
Money raised from selling shares (share issue or IPO)
Share issue
When businesses that are already a publicly held company sell more of their shares
Short-term sources of finance
Less than a year, usually for the daily operations of the business
Sources of finance
Where or how businesses obtain their funds
Stock exchange
A marketplace to buy and sell shares for publicly traded companies
Trade credit
Allowing businesses to postpone payments (buy now pay later)
