Chapter 19 - Business Finance: Needs & Sources Flashcards

1
Q

Start-Up Capital

A

The capital needed by an entrepreneur when first starting a business

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2
Q

Working Capital

A

The capital needed to finance the day-to-day running expenses and pay the short term debts of a business

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3
Q

Non-current Assets

A

Resources owned by a business which will be used for a period of time longer than 1 year.
Eg: Land, Vehicles, Machinery

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4
Q

Capital Expenditure

A

Spending by a business on non-current assets such as machinery, etc.

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5
Q

Long Term Finance

A

Debt or equity used to finance the purchase of non-current assets or expansion plans. Long term debt is borrowing that a business does not expect to repay in less than 5 years

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6
Q

Short Term Finance

A

Loans or debts that a business expects to pay back within 1 year

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7
Q

Retained Profits

A

Profit remaining after all expenses, taxes and dividends have been paid and which is ploughed back into the business

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8
Q

Overdraft

A

An agreement with the bank which allows a business to spend more money that it has in its account to an agreed limit.
The loan has to be repaid within 12 months

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9
Q

Trade Receivables

A

Amount owed to a business by its customers who bought goods on credit

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10
Q

Debt Factoring

A

Selling trade receivables to improve business liquidity

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11
Q

Bank Loan

A

Provision of finance by a bank which the business will repay with interest over an agreed period of time

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12
Q

Leasing

A

Obtaining the use of anon-current asset by paying a fixed amount per time period for a fixed period of time.
Ownership remains with the leasing company

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13
Q

Hire Purchase

A

The purchase of an asset by paying a fixed repayment amount per time period over an agreed period of time.
The asset is owned by the purchasing company on completion of the final payment

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14
Q

Mortgage

A

A long term loan used for the purchase of land or buildings

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15
Q

Debenture

A

A bond issued by a company to raise long term finance usually at a fixed rate of interest

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16
Q

Share Issue

A

A source of permanent capital available to limited liability companies

17
Q

Equity Finance

A

Permanent finance provided by the owners a limited company

18
Q

Micro-Finance

A

Small amounts of capital loaned to entrepreneurs in counties where business finance is often difficult to obtain.
These loans are usually repaid after a relatively short period of time

19
Q

Crowd-Funding

A

Financing a business idea by obtaining small amounts of capital from a large number of people - most often using the internet and social media networks