sources of finance Flashcards
3 examples of what sources of finance can be used for (sof)
to expand a business, to start a business,and to buy stocks
what is a short term SOF
this usually involves small amounts of money, finances runnings costs,usually repayable within one year,always repayable
what is a long term SOF
this usually involves large amounts of money, finances startup costs and expansion,money is repayable over many years but not all sources have to be repayable.
2 examples of short term SOF
bank overdraft and trade credit
what is trade credit
provided by a firms supplier, this allows a business to have the good now and then pay later after a few days
what is a bank overdraft
an agreement between a business and a bank which allows the business to withdraw amounts of money that arent there in their account,with a maximum limit
3 examples of long term SOF
personal savings,share capital and venture capital
what is share capital
when a business who is set up a ltd or plc raises finances by lending out shares investors,people who purchase these shares are called share holders and own a small part of the business meaning they certain rights such as voting what happens in the business.etc
what is venture capital
is when professional investors who typically invest around 10k to 750k in a business that seems high risk but also have the potential to be successful,e.g shark tank and dragons den. these investors typically have entrepreneurial expertise
what is retained profits
when business owners keep or save profits for themselves or reinvest the profits back into the business
3 advantages to crowdfunding
provides cheap investment,can gain publicity and investors may have skills that will be beneficial to the business
