Influences on financial Management

Question 1

what are internal sources of finance?

Answer 1

funds that are provided from within the business by owners, shareholders, retained profits etc

Question 2

what are external sources of finance

Answer 2

funds sources from outside of the business

Question 3

what is short term borrowing?

Answer 3

used to finance temporary shortages in cash flow

Question 4

what is long term borrowing?

Answer 4

borrowing for more than 2 years
used to finance properties, factories, offices etc

Question 5

what is bank overdraft?

Answer 5

it allows a business to overdraw its account to an agreed limit

Question 6

what is a commercial bill?

Answer 6

money from an institution other than a bank that provides large amounts of money for short periods of time
- over $100,000
- borrower my return this money from 90-180 days

Question 7

what is factoring?

Answer 7

a company that gets paid to collect debts for business’ but takes a 10% portion of the loan they’ve collected

Question 8

what is a mortgage?

Answer 8

a loan pain back over a long period of time with a small amount of interest

Question 9

what are debentures

Answer 9

a document that grants a lender a charge over a borrowers assets of equal value incase a loan is unable to be paid back

Question 10

what are unsecure notes?

Answer 10

a loan not backed by any assets
- higher risk for lender

Question 11

what does the term “leasing” mean?

Answer 11

leasing or a lease allows a business to borrow funds and use equipment without large capital outlay

Question 12

is bank overdraft short term or long term?

Answer 12

short-term

Question 13

is factoring long-term or short-term

Answer 13

short term

Question 14

is a debenture short term or long term?

Answer 14

long term

Question 15

are commercial bills short term or long term?

Answer 15

short term

Question 16

are unsecure notes short term or long term

Answer 16

long term

Question 17

is leasing short term or long term?

Answer 17

long term

Question 18

what is a companies equity?

Answer 18

A company’s equity means how many of its component assets are owned by the company

Question 19

what is meant by “ ordinary shares”?

Answer 19

ordinary shares are purchased by an individual by a company to become a part owner of a publicly listed company

Question 20

what are the 4 types of ordinary shares?

Answer 20

1. new issue
2. rights issue
3. placements
4. share purchase plan

Question 21

what is new issue ordinary shares?

Answer 21

new shares sold for the first time

Question 22

what is rights issue ordinary shares

Answer 22

a privilege given to existing shareholders to buy new shares
-trusted investors

Question 23

what is placement ordinary shares

Answer 23

An allotment of shares when a company issues new shares in exchange for cash or otherwise.

Question 24

share purchase plan

Answer 24

an offering given to shareholders to buy more shares without brokerage fees
- can be offered at a discount

Question 25

what is private equity?

Answer 25

money invested into a private company that is not listed on the ASX

Question 26

what is the second subheading of finance?

Answer 26

influences of financial management

Question 27

what does influences of financial management include?

Answer 27

1. internal sources of finance
2. external sources of finance
3. financial institutions
   4.influence of government
   5.global market influences
4. ethical influences

Question 28

what are internal sources of finance?

give 1 example

Answer 28

funds provided within the business by either the owners or from outcomes of business activities

retained profits

Question 29

what are external sources of finance?

Answer 29

funds sources from outside of the business

Question 30

what are two types of external sources in financing?

Answer 30

1. debt financing
2. equity financing

Question 31

what are the 3 forms of short term borrowing in debt financing

give pros & cons

Answer 31

1. bank overdraft
2. comercial bills
3. factoring

pros: quick access to money
con: high interest, not suitable for long term business objectives

Question 32

what are the 4 forms of long-term borrowing?

Answer 32

1. morgage
2. debentures
3. unsecure notes
4. leasing

Question 33

what are the 4 forms of ordinary shares in equity finance?

Answer 33

1. new issue
2. rights issue
3. placements
4. share purchase plan

Question 34

what is private equity?

Answer 34

money invested into a private company not listen on the ASX

Question 35

what are the 6 institutions mentioned in financial institutions?

financial institution: collects funds & invests them in financial assets

Answer 35

1. Banks
2. investment banks
3. finance companies
4. life insurance companies
5. superannuation
6. unit trust

Question 36

what does a bank do?

Answer 36

receive savings as deposits from individuals and in turn, make investments to loans and borrowers

Question 37

how does the influence of governemnt affect business?

Answer 37

federal government influences a business’ financial decision by making economic laws, legislation and the roles of government bodies are monitoring and administration of these business

Question 38

3 examples of government influences

Answer 38

1. Australian securities and investment commission ASIC
2. Company taxation
3. ATO job keeper

Question 39

what are the 3 catagories under global market influences?

Answer 39

1. economic outlook
2. availability of funds
3. interest rates