Sources Of Finance Flashcards
What is an internal source of finance
One that exists within the business
What is an external source of finance
Funds into the business from individuals,businesses or financial institutions
What are short term finances and what are they used for
Finance needed for a limited amount of time,used to pay bills/ overcome temporary cash flow shortages
What are long term finances and what are they used for
Sources of finance needed for a long period of time, used to purchase non current assets
What is an overdraft
When a business withdraws more cash from a bank account than it holds
what business would use an overdraft
- short term
- external
- start up
pros of overdraft
- simple organisation
- short term debt
Cons of overdrafts
- bank could cancel anytime
- credit rating could go low
What are retained profits
When a business uses historical profits from previous years to invest
Where would retained profits be used
- long term
- internal
- established
Pros of using retained profit
- no financial cost
- no control
Cons of retained profits
- may create conflict between shareholders
What are bank loans
When a business borrows sums of money and pays it back with interest over an agreed amount of time
Where would bank loans be used
- long term
- external
- start up
Pros of bank loans
- keep control
- responds to needs
Cons of bank loans
- assets will be taken
- no flexibility
What is crowdfunding
Raising finance from a large amount of people who contribute a small amount
Where Would crowdfunding be used
- long term
- external
- start up
Pros of crowdfunding
- good exposure
- potential for good feedback
Cons of crowdfunding
- profits will be shared
- investors may have limited expenses
What is venture capital
Getting funded by venture capital for some of the share
Where would venture capital be used
- long term
- external
- start up
Pros of venture capital
- no repayment
- reduces risk
Cons of venture capital
- may loose control
- give up a share of the business
What is share capital
Companies raise capital by selling a share in the business
where would share capital be used
- long term
- external
- established
Pros of share capital
Raises capital
Cons of share capital
Can loose control
