Finance Method

Question 1

Retained profit

Answer 1

Internal,from past profit,may need it for future,but cheapest way to get finance.

Question 2

Working capital

Answer 2

Internal,available profit from business,available on day to day basis,can get immediately

Question 3

Selling assets

Answer 3

Internal,assests that are no longer ended ,only applies to established business’s,usually unwanted anyway.

Question 4

Bank loans

Answer 4

External,fixed amount/time given 3-5years,risk to personal assets,offer security against loans easy.

Question 5

Overdraft

Answer 5

Internal,withdraw from account than own,bad rep,get more than own.

Question 6

Trade credit

Answer 6

External,buy items obtain at later date,bad rep,xan get discount easy

Question 7

Debt factoring

Answer 7

External,set receivable,discounts decrease revenue,can obtain immediately

Question 8

Leasing

Answer 8

Business pays for use of asset but will never own asset

Question 9

Share capital

Answer 9

Money invested in company by shareholders .in return get share of company

Question 10

Venture capital

Answer 10

Small medium high risk growing businesses in return for a high stake business with direct say in how its run

Question 11

Trade credit

Answer 11

When business buys new raw materials,components,services,but agrees to pay at later date

Question 12

Debt factoring

Answer 12

Raise cash by selling outstanding sales invoices (money owed by customers)to a third party at(a debt factoring company) discount
Basically u pay a larger amount of money than contracted if in debt so u owe less next time bill comes n business will use that money for finance.

Question 13

Income statement

Answer 13

Shows business performance over given time of period gross profit n net profit

Question 14

Margin of safety

Answer 14

Shows how much a producer can reduce output before business starts to make a loss