Sources of Finance Flashcards
Margin
Sales are 100% - stay within 100% COS is balancing figure
Markup
Sales are 100 + markup %
return on capital employed
PBIT/TA-CL
Profit per £1 capital used in business
Measuring use in not for profit - three Es
Effectiveness - achieved goals
economy - reduction of cost
Efficiency - being effective at minimum cost
what is defined
those product features that are particularly valued by a group of customers and therefore where the organisation must excel to outperform competitors
Critical Success Factors
What is defined
performance standards used to measure achievement of critical success factors
KPIS
TCFD four areas
governance
strategy
risk management
metrics and targets
What is described
integrated set of performance measures linked to the achievement of strategic objectives
BSC
BSC perspectives
Customer
Internal business processes
innovation and learning
Financial
What is described
banks take deposit from customers then use those funds to lend money to other customerse
financial intermediation
What is defined
operate money transmission service in the economy, operate a cheque account and deal with cheque clearing sometimes known as commercial banks retail banks or clearing banks
primary banks
What is defined
made up of wide range of merchant banks and other banks, do not tend to take part in the clearing system
Secondary banks
Main aims of bank of England
monetary stability and financial stability
Four types of contractual relationship between bank and customer
receivable/payable
bailor/bailee
principal / agent
mortgagor/mortgagee
what is defined
software and other technologies that can be used by businesses to automate and improve financial services
fintech
What is described
a term that covers a vast array of wholesale markets buying and selling different forms of money or marketable securities
money markets
what is defined
short term highly liquid investments that are readily convertible into cash, companies may use them to invest ST surplus finance
marketable securities
What kind of financial instrument
issued by bank of England on behalf of government, minimum investment 50k, run for three months, secure and liquid but low returns, can convert by selling in discount market
treasury bills
What kind of financial instrument
money in bank accounts of banks and other financial intermediaries which offer investment periods ranging from overnight to five years, yields exceed that of treasury bills
deposits
What kind of financial instrument
Certificate for deposit of 50k or more for fixed term which can be sold earlier than maturity in the CD market
certificate of deposit
what kind of financial instrument
offer large range of maturities and rates based on money market rates, can have CGT advantages
Gilts
what kind of financial instrument
debentures and loans of companies quoted on stock exchange, rates fluctuate with general interest and there is good liquidity
bonds
What kind of financial instrument
IOUs issued by large company can be held to maturity or sold to third parties
Commercial paperes
what is described
national and international market in which a business may obtain finance needed for short term and long term plans
capital market
Money market how long looking at raising funds for
1 year
capital markets how long looking at raising funds for
more than one year
Within national stock market there is
primary - new share issues
secondary - trading shares already in issue
what is defined
held by owners of business and through their voting rights they exercise ultimate control
equity
What is defined
part of the risk bearing ownership of the business, but entitled to dividend before ordinary so carry less risk. return is usually fixed maximum dividend so similar to debt
preference shares
What is defined
fixed interest rate borrowing with set repayment date. Secured on specific asset or assets in general such that lenders are protected above unsecured creditors in legislation
Loan stock
Factors to consider when making rights issue
issue costs
shareholder reaction
control
unlisted company - difficult to find buyers if rights not taken up
what is defined
short term loan of variable amount up to a limit from a bank, typically repayable on demand, interest charged on day to day basis at variable rate
overdraft
advantages of overdraft
flexible
lower cost
Disadvantages of overdraft
risk
cost
control
what is defined
business receives loan finance and insurance (non recourse factoring) so that in the event a customer does not pay, the business does not have to repay the loan
debt factoring
services typically offered by debt factor
financing credit taken by customers
insuring receivables
managing running of receivables ledger
what kind of debt factoring is when the debt factor takes on all risk, if customer do not pay, business doesn’t have to repay the loan
non-recourse factoring
Small companies can use what to raise capital
angel investors/crowd funding
AIM
VCs
what is defined
Any source of finance that is used specifically to finance projects or activities that directly lead to environmental benefit.
green finance
what is described
any type of bond instrument where proceeds exclusively applied to finance or re finance in part or in full new and or existing eligible green projects
green bonds
