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Business > Finance > Flashcards

Finance Flashcards

1
Q

What are the main sources of finance? (9)

A
  1. Retained profit
  2. Sale of assets
  3. Loans
  4. Debentures
  5. Venture capital
  6. Ordinary share capital
  7. Overdrafts
  8. Leasing
  9. Trade credit
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2
Q

What is retained profit?

A

Profit kept in the business

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3
Q

What is sale of assets?

A

Selling valuable items owned by the business

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4
Q

What is a loan?

A

Borrowing money from someone or somewhere (and repaying monthly)

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5
Q

What is a debenture?

A

Borrowing money and repaying it all back at once

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6
Q

What is venture capital?

A

Investment from an entrepreneur in return for a share in the business

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7
Q

What is ordinary share capital?

A

Share parts of the business

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8
Q

What is an overdraft?

A

A negative bank balance

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9
Q

What is leasing?

A

Renting a product

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10
Q

What is trade credit?

A

Buying goods and services with credit from a supplier

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11
Q

Advantages and disadvantages of retained profit

A

Advantage: Funds future expenditure

Disadvantage: Doesn’t get paid to owners

(internal - short term)

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12
Q

Advantages and disadvantages of the sale of assets

A

Advantage: Earn money quickly

Disadvantage: Lose a valuable item

(internal - short term)

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13
Q

Advantages and disadvantages of loans

A

Advantages: Payments are fixed and easy to arrange

Disadvantage: Intrest rates are high

(external - long term)

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14
Q

Advantages and disadvantages of debentures

A

Advantage: Pay nothing till the end

Disadvantage: More expensive (more intrest)

(external - long term)

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15
Q

Advantages and disadvantages of venture capital

A

Advantage: Recieve money and mentoring

Disadvantage: Loss of ownership and control

(external - long term)

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16
Q

Advantages and disadvantages of ordinary share capital

A

Advantage: Don’t have to repay

Disadvantage: Lose control

(external - short term)

17
Q

Advantages and disadvantages of overdrafts

A

Advantage: Flexible and short term

Disadvantage: Costs more to pay back

(external - short term)

18
Q

Advantages and disadvantages of leasing

A

Advantage: Cheaper than buying a new product

Disadvantage: Payments are on-going

(external - short term or long term)

19
Q

Advantages and disadvantages of trade credit

A

Advantage: No loss of ownership and delays payment

Disadvantage: Potential loss of discount offered for cash payments

(external - short term)

20
Q

What are running costs?

A

Costs associated with the day to day running of the business (these will often be needed to pay immediately)

21
Q

What are start-up costs?

A

The costs that are included before the business starts to trade

22
Q

Running costs are paid for with…not…

A

Running costs are paid for with REVENUE FROM SALES not FINANCE

23
Q

Name 5 business costs

A
  1. Wages
  2. New premises
  3. Stock
  4. Rent
  5. Insurance
24
Q

What is limited liability?

A

When the owners of a business are only partly responsible for paying any debts of the business

25
Q

What is unlimited liability?

A

When the owners of a business are fully liable for paying any debts of the business

26
Q

Break-even means…

A

When a business has made enough money through product sales to cover the cost of making the product (no profit; no loss)

27
Q

What is a likely source of finance for buying premises?

A

Mortgage

28
Q

What is interest reward for?

A

Lending (putting money in the bank and leaving it there for a certain amount of time)

29
Q

What is someone who lends money called?

A

Creditor

30
Q

What might sole traders lose if they can’t pay back loans?

A

Personal assets

31
Q

What is a business?

A

An organisation that provides goods and services to customers who want them

32
Q

What are resources?

A

The different elements needed in order to run a business

33
Q

What are natural resources?

A

Resources that come from nature, for example, sand, wood and water

34
Q

What are human resources?

A

People to do the work needed in the business

35
Q

What are man-made resources?

A

Things like equipment, materials, machinery, furniture etc.

Business (3 decks)

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