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Business Studies A-Level 🌙 > Learning Aim D > Flashcards

Learning Aim D Flashcards

1
Q

Sources of finance (3) ?

A

Retained profit
Net current assets
Sale of assets

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2
Q

Retained profit ?

A

Profit kept in the business to fund future expenditure

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3
Q

Net current assets ?

A

Money available in the business to fund day to day expenses

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4
Q

Sale of assets ?

A

Selling an item of worth owned by a business in order to achieve an immediate cash injection

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5
Q

What is Owners capital ?

A

Money invested in the business from owners personal savings

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6
Q

What is loans ?

A

Money borrowed from financial institution for a set period of time

Interest will be payable on the loan

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7
Q

What is crowd funding ?

A

Attracting investment from a larger number of speculative investors, usually through social Media

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8
Q

What is a mortgage ?

A

A long term loan usually about 25years, secured against an asset E.g. building

Interest will be paid on mortgage

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9
Q

What is venture capital?

A

Investment from an experienced entrepreneur in return for a stake/equity in the business

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10
Q

What is debt factoring ?

A

Selling on of a businesses debts to 3rd party to receive cash quickly.

Factor company pays business percentage of money owed and takes on responsibility of chasing debts

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11
Q

What is hire purchase ?

A

Paying to use an asset in instalments to spread the cost over its useful life

Asset will remain property of seller until final instalment has been paid

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12
Q

What is leasing ?

A

Paying to use an asset in instalments to spread cost of its useful life

Ownership remains with seller throughout agreed lease

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13
Q

What is trade credit ?

A

Period of time offered by suppliers to allow customer to purchase a good or service now and pay later E.g. 30 days after purchase

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14
Q

What are grants ?

A

A lump sum of money given by the government, can be used to provide and fund employment in deprived areas or for environmentally friendly research

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15
Q

What are donations ?

A

A lump sum of money given voluntarily to a charity or social enterprise

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16
Q

What is peer to peer lending ?

A

When one business person lends money to another business person in return for interest payments

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17
Q

What is invoice discounting ?

A

Reductions offered to customers

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18
Q

Advantages of owners capital ?

A

No interest payments or need to repay

High level of commitment from owner

19
Q

Disadvantages of owners capital?

A

Amount available may be limited

More than one owner can cause friction

20
Q

Advantages of loans ?

A

Regular pre agreed repayments make planning and budgeting easier

Ownership and control not lost

21
Q

Disadvantages of loans ?

A

Interest is charged on amount borrowed

Interest rates can fluctuate

Often secured against an asset that can be seized if failure to meet repayments

Interest must be paid regardless if profit is being made

22
Q

Advantages of crowd funding ?

A

Ability to raise finance from large group of investors

No interest is paid

23
Q

Disadvantages of crowd funding?

A

Partial loss of ownership

No guarantee that crowd funding will attract sufficient investment

24
Q

Advantages of mortgages ?

A

Large amounts of finance can be raised and repaid over long period of time

Ownership or control isn’t lost

25
Q

Disadvantages of mortgages ?

A

Interest is charged on amount borrowed

Often secured against asset

Interest must be paid regardless of profit

Not suitable for small amounts

26
Q

Advantages of venture capital?

A

Finance provided by business professional

Venture capitalists are likely to be high risk takers

27
Q

Disadvantages of venture capital?

A

Partial loss of ownership and control

Conflict may arise between entrepreneur and venture capitalist

28
Q

Advantages of debt factoring ?

A

Speeds up flow of cash into business from debts

Factor company takes on the risk of bad debt

29
Q

Disadvantages of debt factoring ?

A

Only receive a percentage of amount owed, therefore reducing profit

Can give wrong impression or alienate customers

30
Q

Advantages or hire purchase ?

A

Avoids need to pay lump sum for use or asset

Regular instalments makes planning and budgeting easier

Spreads cost

31
Q

Disadvantages of hire purchase ?

A

Overall amount paid for asset is likely to be higher than if purchased outright

Only really suitable for low cost assets E.g. vehicles, not premises

32
Q

Advantages of leasing ?

A

Responsibility for repairs stays with supplier

Spreads cost

33
Q

Disadvantages of leasing ?

A

Overall amount paid likely to be higher than bought outright

Never actually have ownership of asset therefore payments will be ongoing

34
Q

Advantages of trade credit ?

A

Delays need to pay for goods and services when purchased therefore aiding cash flow

No loss or ownership or control

35
Q

Disadvantages of trade credit ?

A

Potential loss of discounts offered for cash payments

Only suitable for short term source of finance

36
Q

Advantages of grants ?

A

No need to repay
No interest charges
No loss of ownership or control

37
Q

Disadvantages of grants ?

A

Lengthy application process

May only be rewarded if certain conditions are met

38
Q

Advantages of donations ?

A

No need to repay
No interest charges
No loss of ownership and control

39
Q

Disadvantages of donations ?

A

Likely to be small amounts

Unpredictable

40
Q

Advantages of peer to peer lending ?

A

Interest rates can be lower than lending from traditional financial institutions

Fixed rate of interest can be agreed

41
Q

Disadvantages of peer to peer lending ?

A

Amount available may be limited and only available for a short time

42
Q

Advantages of invoice discounting ?

A

No need to repay
No interest charges
No loss of ownership or control

Reduces costs to business therefore increases profit

43
Q

Disadvantages of invoice discounting ?

A

Often only available if purchases are made in cash, therefore affecting cash flow

Business Studies A-Level 🌙 (5 decks)

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