Finance ( Catch Up )

Question 1

Finance

Answer 1

Money

Question 2

Sources of finance

Answer 2

This is where we get finance from

Question 3

Businesses need finance for

Answer 3

Starting up
Expansion
Bill payments
Take over bid
Internal growth
Replacing machinery or equipment

Question 4

Internal sources of finance

Answer 4

Owners investments
Retained profits
Sale of fixed assets
Sale of stock
Debt collection

Question 5

External sources of finance (definition)

Answer 5

Finance provided by people or institutions outside the business,creates a debt that requires payment

Question 6

External sources of finance

Answer 6

Loans
Overdrafts
Share capital
Debentures
Trade payables
Venture capital
Mortage
Crowdfunding

Question 7

Business overdrafts

Answer 7

A facility that will allow you to withdraw more money from your account than is available

Question 8

Business overdrafts ( adv )

Answer 8

Flexible - you only borrow what you need at the time making it cheaper than a loan
Quick to arrange

Question 9

Business overdrafts ( dis adv )

Answer 9

Usually only available for small sums of money
Expensive as high rate of daily interest is charged

Question 10

Bank loan ( adv )

Answer 10

Can be arranged quickly
Can be repaid over a long period of time

Question 11

Bank loan dis adv

Answer 11

Interest has to be paid in addition to loan amount

Question 12

Bank loan dis adv

Answer 12

Interest has to be paid in addition to loan amount

Question 13

Mortgage

Answer 13

Long term source of finance. A sum of money borrowed form the bank that is secured against a property and payed in instalments

Question 14

Mortgage (adv)

Answer 14

Mortage is given for a long period of time
Large amounts of finance can be raised quickly

Question 15

Mortgage ( dis adv )

Answer 15

Interest is charged
Property can be lost to the mortgage lender if repayments are missed

Question 16

Share definition

Answer 16

Money raised by shareholders through the sale of ordinary shares. Buying shares gives the buyer part ownership to the business.

Question 17

Share capital ( adv )

Answer 17

Shareholders cannot refund there shares ( they must find someone else to sell them too )
No divededs to be payed if the business has a poor year. Shareholders are not promised dividends and are only payed them is the business has made sufficient money to pay all its costs

Question 18

Share capital ( dis adv )

Answer 18

Dilutes control for the founders. The more shareholders the less control the founders have over
As a business grows it can become vulnerable to a takeover. This is bad as they are sold publicly and if an individual or group have enough shares they can persuade other shareholders to vote for a new management team.

Question 19

Crowd funding

Answer 19

Involves a large number of people investing small amounts of money in a business usually online.

Question 20

Crowdfunding ( adv )

Answer 20

Acts as a form of market research. If people don’t invest it means the idea is not attractive or distinctive enough, indicating the business is likely to fail
Provides opportunity’s for individuals to start up a business even if they don’t have access to other sources of funding.

Question 21

Crowdfunding ( dis adv )

Answer 21

Business must be interesting. Crowdfunding is ostensibly successful when business is interesting appealing and innovative
Difficult to reach funding target .

Question 22

Crowdfunding ( dis adv )

Answer 22

Business must be interesting. Crowdfunding is ostensibly successful when business is interesting appealing and innovative
Difficult to reach funding target .