Chapter 8- Raising Finance Flashcards
What is ordinary share capital?
Ordinary share capital is money given to a company by shareholders in return for a share certificate. This gives the shareholders part ownership of the company and entitles them to a share of the profit.
Name methods of raising finance
- Ordinary share capital
- Loan capital
- Bank Overdraft
- Venture Capital
- Personal Sources
What are the features of OSC?
- Shareholders receive vote for each share owned
- Shareholders decide annual general meeting dividend per share will be paid
What is loan capital?
Loan capital is the money received by an organisation in return for the organisations agreement to pay interest during the period of the loan an I repay the loan within an agreed time.
What is a bank loan?
A bank loan is a sum of money provided to a firm or an individual by a bank for a specific agreed purpose.
What is a bank overdraft?
A bank overdraft occurs when a bank allows either an individual or organisation to overspend its current account in the bank up to an agreed limit and for a stated time period.
What is venture capital?
Venture capital is finance provided to small or medium sized firms that seek growth, but which may be considered risky by typical share buyers or other lenders.
Name the main sources of personal finance
- Personal Savings
- Mortgage on property
- Selling private assets
- Borrowing privately
What is capital expenditure?
Spending on items that can be used repeatedly(fixed assets)
What is revenue expenditure?
This is spending on current, day-to-day costs, such as the purchase of raw materials and payment of wages. (Short Term Assets)
Name the factors that influence how finance is raised.
- Legal Structure
- Use of the finance
- Account Required
- Level of Risk
How does levels of risk effect raising finance?
If an enterprise is viewed as risky, firms will find it harder to attract loans, although venture capital may be a possibility
