Finance Definitions Chunk 2

Question 1

Internal Sources of Finance

Answer 1

Retained Profits

Question 2

External Sources of Finance

Answer 2

Debt and Equity

Question 3

Short-Term Debt Finance

Answer 3

Overdraft, commercial bills, factoring

Question 4

Define Bank Overdraft

Answer 4

Service provided by bank where the account holder can withdraw past the credit level of the overdraft account into a deficit for an agreed amount

Question 5

Define Commercial Bills

Answer 5

Short-term secured loan (against business’s assets) from a bank or non-bank institution

Question 6

Long-Term Debt Finance

Answer 6

Mortgage, debentures, unsecured notes, leasing

Question 7

Define Debentures

Answer 7

Issued by a company for a fixed rate of interest and a fixed period of time, raising funds from investors

Question 8

Define Unsecured Notes

Answer 8

Loan from investors for a set period of time.

Question 9

Equity Finance

Answer 9

• Ordinary Shares- New issues, rights issues, placements, share purchase plans - Private Equity

Question 10

Define new and rights issues

Answer 10

New Issues- A share that has been issued and sold for the first time on the primary market Rights Issue- Shares issued at special price by company to current shareholders in exchange for old shares

Question 11

Define placements

Answer 11

Allotment of shares, debentures and so on made directly from the company’s investors

Question 12

List the Financial Institutions

Answer 12

Banks, Investment Banks, Finance Companies, Superannuation Funds, Life Insurance Companies, Unit Trusts and Australia Securities Exchange

Question 13

List the Influence of Government

Answer 13

Australian Securities and Investments Commission and Company Taxation

Question 14

List the Global Market Influences

Answer 14

Economic Outlook, Availability of Funds, Interest Rates