Finance(21) Flashcards
1
Q
What is working capital?
A
It is the finance needed by a business to pay for its day-to-day costs
2
Q
What is capital expenditure?
A
It is the money spent on fixed assets which will last for more than a year
3
Q
What is revenue expenditure?
A
It’s the money spent day-to-day expenses(e.g. wages, rent), which don’t involve buying long-term assets
4
Q
What do businesses need money for?
A
- Starting up new businesses
- Expanding existing businesses
- Increasing working capital
5
Q
What are the four main sources of finance?
A
- Internal & external finance
- Short-term & long-term finance
6
Q
Name some types of internal sources finance
A
- Retained profit
- Sale of assets
- Sale of inventory
- Owner’s savings
7
Q
Name some types of external sources of finance
A
- Issue of shares
- Bank loans
- Debentures
- Grants/subsidies/micro-finance
- Factoring debts
8
Q
Name some short-term sources of finance
A
- Overdrafts
- Trade credit
- Factoring debts
9
Q
Name some long-term sources of finance
A
- Bank loans
- Hire purchase
- Leasing
- Issue of shares/Debentures
10
Q
What do banks look at while deciding to lend?
A
- Cash flow forecast
- Business plan
- forecasted income statement
- Why is the loan needed?
- Gearing ratio
11
Q
What do shareholders look at while deciding to invest?
A
- How has share price changed?
- Gearing ratio
- Dividends
- Are future prospects good?
