Chapter 19 - Business Finance☀️

Question 1

Explain sale and leaseback

Answer 1

The sale of a valuable fixed asset to an investment company at its market value and then it is leased back over a period of time at an annual rent

Question 2

What are grants?

Answer 2

Non-repayable sources of finance from the government and the European Union to help people who wish to start a new business.

Question 3

What are the requirements when opening a business bank account?

Answer 3

1. Completed application form
2. Original certificate of incorporation
3. Copy of the Memorandum and Articles of Association

Question 4

What are the advantages and disadvantages of using a medium term source of finance?

Answer 4

Adv: The firm has the use of an asset without having to pay out a large amount of money
Dis: 1. Firm never owns the asset
2. Firm ends up paying more then it is worth

Question 5

What are the advantages and disadvantages of using sale and leaseback as a long term source of finance.

Answer 5

Adv: 1. Firm receives cash needed to run business
2. Firm can continue using asset as they always did
Dis: Firm will not benefit if the value increases

Question 6

What factors will a bank consider before granting a loan?

Answer 6

1. Credit History: Has the company paid debts in the past

2. Ability to Repay: How does cash flow forecast look