Sources of finance

Question 1

Retained Profit

Answer 1

profit kept in the business after owners have been given their share of the profit.

Question 2

Sale of existing assets

Answer 2

assets that the business doesn’t need anymore, for example, unused buildings or spare equipment can be sold to raise finance

Question 3

Sale of inventories:

Answer 3

sell of finished goods or unwanted components in inventory.

Question 4

Debt factoring

Answer 4

debtor is a person who owes the business money for the goods they have bought from the business.

Question 5

Grants and subsidies

Answer 5

government agencies and other external sources can give the business a grant or subsidy

Question 6

Overdrafts

Answer 6

similar to loans, the bank can arrange overdrafts by allowing businesses to spend more than what is in their bank account

Question 7

Hire Purchase

Answer 7

allows the business to buy a fixed asset and pay for it in monthly instalments that include interest charges.

Question 8

Leasing

Answer 8

this allows a business to use an asset without purchasing it. Monthly leasing payments are instead made to the owner of the asset.