Obtaining Finance Flashcards
What is finance in business?
Money used to fund business activities, such as startup, operation, or expansion.
Name the two main types of business financing.
Equity financing and debt financing.
. What is an advantage of using retained profits?
It’s a cheap source of finance with no borrowing cost.
What is debt financing?
Borrowed money provided for a limited term.
What is equity financing?
Money contributed by the business owners
What is an example of internal finance for small businesses?
Retained profits or the sale of non-current assets.
What is a disadvantage of using retained profits?
t can lead to cash shortages for the owner.
What is a disadvantage of selling non-current assets?
They may sell at a low price or be hard to sell quickly.
What is a disadvantage of trade credit?
Late payments may incur interest, and it can harm reputation.
What is an advantage of using a business credit card?
Can build business credit and offers interest-free days.
What is a disadvantage of a bank overdraft?
Higher interest costs compared to other borrowings.
What is a bank overdraft?
Agreement to withdraw more than the deposited balance in an account.
What is a term loan?
A sum borrowed with repayment over an agreed number of years.
What is leasing?
Renting an item over a fixed period instead of purchasing it.
What is a mortgage?
A loan for buying property with payments spread over many years.
