D1 Sources of finance

Question 1

types of internal sources of finance

Answer 1

retained profit
net current assets
sale of assets

Question 2

what is retained profit?

Answer 2

retained profit is profit kept within the business from profit after tax to help finance future activity

Question 3

what are net current assets?

Answer 3

net current assets is the different between current assets and current liabilities that can be used to fund day to day activities.

Question 4

types of external sources of finance

Answer 4

owner's capital
loans
mortgage
crowdfunding
venture capital
debt factoring
hire purchase
leasing

Question 5

what is owner’s capital?

Answer 5

when an entrepreneur invests their own money into a business from personal savings

Question 6

what are loans?

Answer 6

when a lender provides capital to a borrower and the borrower agrees to repay the borrowed money, with interest, over a period of time

Question 7

what is crowdfunding?

Answer 7

crowdfunding raising finance from a large number of people each investing different amounts of money.

Question 8

what is venture capital?

Answer 8

investment from an established entrepreneur or business into another business in return for a % equity in the new business.

Question 9

what is debt factoring?

Answer 9

the process of selling the debts owed to a business to a financial institution.
receives funds immediately but a reduced amount.

Question 10

what is leasing?

Answer 10

a contract that allows the renting of assets from another party.