Source of finance Flashcards
A short term finance is used to help a business maintain what?
A positive cash flow
What is Overdraft?
The most common forms of finance. They should be used carefully and only in emergencies as they can become expensive due to high interest rates charged by banks
a common feature of a bank Overdraft includes Variable Interest Rate. What is a Variable Interest Rate?
The cost of borrowing money will change when the interest rate changes
What is Trade Credit
Businesses may give firms one or two months to pay for certain purchases. This is useful for a small firm as they have time to earn the money needed to pay debt. However, if the firm makes the payment too late, they could end up with large fee.
LONG TERM Source of finance includes personal savings. What is Personal Savings?
A business owner may put some of their own money into the business to get it started or if it is having cash flow problems. A risk: The owner could end up losing their money if the business fails
What is Retained Profit? (LONG-TERM SOURCE)
The amount of money a shareholder gets from profits
What is Crowd Funding? (LONG-TERM SOURCE)
Involves a large number of people investing small amounts of mainly a business, usually online
What is Share Capital? (LONG-TERM SOURCE)
Individuals can buy shares in the business. This means that they will have part ownership in the business.
