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Business Finance > Internal and external sources of finance > Flashcards

Internal and external sources of finance Flashcards

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1
Q

Internal sources of finance? (3)

A

Retained profits
Friends and family
working capital

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2
Q

External sources of finance? (7)

A 
Business angels
loans
grants
crowd funding
overdraft
share issue
venture capital
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3
Q

What is a business angel?

A

A person who provides financial backing for a business which can be a 1 time investment or multiple in exchange for equity

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4
Q

What are retained profits?

A

Profits invested in the business

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5
Q

Benefits of reviving money from family/friends?

A

No/Little interest

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6
Q

Drawbacks of reviving money from family/friends?

A

hard to persuade

Personal fallout

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7
Q

What is working capital?

A

current assets - current liabilities = WC

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8
Q

Benefits of business angels?

A

No repayments

Knowledge and contacts

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9
Q

Drawbacks of business angels?

A

Hard to find

loss of control

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10
Q

Benefit of a loan?

A

Low interest

long time to pay back

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11
Q

Drawback of a loan?

A

interest to pay

unlimited liability

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12
Q

Benefit of a grant?

A

No repayment

reduce unemployment

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13
Q

Drawback of a grant?

A

Only accessed by companies that are ethical

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14
Q

Benefit of crowdfunding?

A

No interest

No repayment

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15
Q

Drawback of crowdfunding?

A

Long time to raise

have to reach target

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16
Q

Benefit of overdraft?

A

Flexible

help cash flow

17
Q

Drawback of overdraft?

A

high interest

18
Q

What is share capital/issue?

A

Investors invited to buy shares in business

19
Q

Benefits of share issue?

A

Gain money world wide

Large amount raised

20
Q

Drawback of share issue?

A

loss of control

could be taken over

21
Q

What is a venture capital?

A

Person who invests in business in return for percentage of business ownership and profits

22
Q

Benefits of venture capital?

A

knowledge and contacts

23
Q

Drawbacks of venture capital?

A

investor has control

loss of control

24
Q

Benefit of trade credit?

A

Slows down out flows

less likely to go bankrupt

25
Q

Drawbacks of trade credit?

A

unethical

hard to get for small businesses

26
Q

Benefits of leasing?

A

helps with budgeting

27
Q

Drawbacks of leasing?

A

don’t own equipment

puts pressure on outflows

Business Finance (4 decks)

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