Finance - Sources Of Finance Flashcards
- Define a bank overdraft
- Give one advantage and disadvantage of it
Allows a business to overdraft an amount of money from their bank account
A - easy to set up -> quick access to finance
D- must be paid back fast –> can get expensive due to high interest rates
What is a government grant?
Give 1 advantage and 1 disadvantage of it
Finance given from the government to encourage entrepreneurs to start a business by offering expert knowledge
A - no need to repay –> saves money
D - One off payment, need to meet criteria
What are retained profits?
Give one advantage and disadvantage
Business saves a portion of its profits to reinvest back into the company
A - profit belongs to the company —> owner is in control
D - relying on profit is risky –> business may not make a profit sometimes
What is leasing?
Give one advantage and disadvantage of it
Vehicles and machinery is leased from another company ans a monthly fee is paid
A - leasing company repairs and maintains equipment–> saves costs
D- asset is never owned by the business
What is a bank loan?
Give one advantage and disadvantage of it
Business is lent money overall set period of time
A - payments are made in installations –> easier to budget
D - interest is paid on top of loan –> expensive
What is share issue?
Give one advantage and disadvantage of it
Selling more shares to raise capital for the business
A - large sums of money can be raised
D - more shareholders = more dividends to pay —> profits are shared
