factors affecting sources of finance Flashcards

1
Q

Pay back term

A

The quicker the payback term, the less interest the organisation will pay on borrowing.

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2
Q

Short-term finance required

A

An organisation may only need finance for a short term, perhaps to cover a cash-flow problem, so an overdraft could be used

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3
Q

Size and type of organisation

A

Organisations are restricted to certain sources of finance, for example, a public sector organisation cannot sell shares and has to rely on government funding

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4
Q

Long-term finance required

A

An organisation may need long-term finance, perhaps to fund the purchase of property, so would choose a mortgage

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5
Q

interest rates

A

An organisation will choose the finance with the lowest interest rate available.

Often a hire purchase agreement will have a lower interest rate than a bank loan so would be selected to keep the costs of the financed as low as possible

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