raising finance 2.1

Question 1

internal sources of finance

Answer 1

retained profit
sales of assets
owners capital

Question 2

external sources of finance

Answer 2

family and friends
banks
business angels
crowdfunding

Question 3

external methods of finance

Answer 3

loans 
share capital
venture capital 
overdrafts
leasing
grants

Question 4

crowdfunding

Answer 4

many small investments from a web based appeal

Question 5

venture capital

Answer 5

investment from an established business into another business in return for a percentage of equity in the business

Question 6

share capital disadvantages

Answer 6

loss of ownership

threat of takeover

Question 7

overdraft

Answer 7

the facility to overspend on a current account up yo an agreed sum - with high interest payments

Question 8

leasing

Answer 8

paying for an asset in multiple instalments - the item is still the leasers property until the last payment

Question 9

trade credit

Answer 9

paying supplies a period of time after goods and services have been received

Question 10

grants

Answer 10

fixed amounts of capital provided by governments usually to benefit the environment around a specific location e.g. increase employment

Question 11

limited liability

Answer 11

if the business fails owners only lose what they have invested; personal belongings are not at risk

Question 12

unlimited liability

Answer 12

owners are responsible for total debts and personal items are at risk of being seized

Question 13

what does a business plan include?

Answer 13

• products and services for sale
• market size, share and competitors
• strategy
• operations and financial forecasts

Question 14

purpose of a business plan?

Answer 14

secure external funding e.g. banks
identify future problems to prepare
keep on track of targets

Question 15

cash inflows

Answer 15

cash sales
owners capital
sales of assets
bank loans

Question 16

cash outflows

Answer 16

purchasing stock/materials
wages
debts
creditors
buying assets

Question 17

cash flow forecast

Answer 17

forward looking statement attempting to predict future inflows and outflows

Question 18

cash flow statement

Answer 18

backward looking statement showing what happened to inflows and outflows

Question 19

net cash flow

Answer 19

inflows - outflows

Question 20

opening balance

Answer 20

how much the business starts off with at each new month

the closing balance for one month will be the opening balance for the next