methods of finance

Question 1

what will a bank want to see to know their money will be paid back?

Answer 1

business plan

Question 2

define share capital

Answer 2

finance raised from the sales of shares as a form of equity capital

Question 3

what will shareholders be rewarded for share capital

Answer 3

for the investment by the payment of dividends and also benefit from an increase in share prices increasing values of their shares

Question 4

who is share capital an option for

Answer 4

Ltds and Plcs

Question 5

what are advantages of share capital

Answer 5

only need to pay dividends if profit is made
possible to raise large amounts of finance
no interest

Question 6

what are the disadvantages of share capital

Answer 6

loss of ownership
risk of loss of control with a threat of hostile take over
complex and costly process

Question 7

define venture capital

Answer 7

investments from an established business to another business in return for a percentage equity

Question 8

list advantages of venture capital

Answer 8

expertise to help business
large sums of money for investment
easier to attract other sources of finance

Question 9

list disadvantages of venture capital

Answer 9

partial loss of owneship
risk of conflict
long and complex process

Question 10

define overdraft

Answer 10

facility to overspend on a current account to an agreed sum

Question 11

list advantages of overdraft

Answer 11

quick and easy to arrange
no charges for paying off overdraft
only borrowed when required

Question 12

list disadvantage of overdraft

Answer 12

bank can call it anytime
interest payments
banks may secure overdraft against business assets