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Business Y10 > sources of finance > Flashcards

sources of finance Flashcards

1
Q

owners capital

A

money that is put into the business from the private savings of the owners

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2
Q

owners capital advantages

A

quick and convenient
doesn’t require borrowing money
no interest payments to make

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3
Q

owners capital disadvantages

A

the owner might not have enough savings or may need the cash for personal use
once the money is gone, it’s gone

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4
Q

sale of an asset

A

businesses may have assets they no longer need, such as an old factory sitea

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5
Q

advantages of sales of an asset

A

can create space for more profitable uses
can be quick
raise money from unused equipment

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6
Q

disadvantages of sale of an asset

A

might not get the full market value of the assets or even be able to sell them at all
might need the assets in the future

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7
Q

retained profit

A

a business can pay out the profits it made last year to owners or shareholders, or it can reinvest the profit back into the businessr

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8
Q

retained profit advantages

A

quick and convenient
easy access to the money
no interest payments to make

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9
Q

disadvantages retained profit

A

once the money is gone, it is not available for any future unforeseen problems the business might face

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10
Q

over draft

A

can withdraw more money out of the bank than you actually have

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11
Q

overdraft advantages

A

quick access
allows emergency purchases

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12
Q

overdraft disadvantages

A

high interest rates
is only a short term solution

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13
Q

bank loan

A

money that the business loans fom a bank but will pay back over a period of time and will include interest

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14
Q

bank loan advantages

A

easy and quick to access
can get a significant amount of money at one time

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15
Q

bank loan disadvantages

A

have to pay interest
difficult for a new business to access

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16
Q

friends/family loan

A

money that is loaned by the owners friends or family, but will be paid back of a period of timef

17
Q

friends/family loan advantages

A

low interest
money may not need to be paid back

18
Q

friends/family loan disadvantages

A

money may be lost if the business fails
arguments may occur between family members

19
Q

grant

A

money that is given to the business to invest usually i growth, doesnt have to be paid back

20
Q

grant advantages

A

does not need to be paid back
available to small businesses

21
Q

grant disadvantage

A

business needs to meet certain criteria
it is time-consuming to apply for grants and to complete the paperwork

22
Q

venture capitalist / business angels

A

venture capital is money invested ina business by professional investors. when veenture capitalists invest, the expect a say in how the business will run. business angels tend to focus only on new businesses looking to grow

23
Q

venture capitalists/ business angel advantages

A

gain money quickly
potential to raise huge amount of money
they may offer advice and help

24
Q

venture capitalists/ business angel disadvantages

A

owner must give away part of the business
they may have a different vision for the business than the owner does

25
Q

new partner

A

good way of helping fund investment

26
Q

new partner advantages

A

easy way to gain money
potential to raise huge amount of money
they may offer advice and help

27
Q

new partner disadvantages

A

owner must give away part of the business
they may have a different vision for the business than the owner does

28
Q

share issue

A

able to raise extra finance by selling shares

29
Q

share issue advantages

A

can gain lots of money quickly
no interest payable

30
Q

share issue disadvantages

A

give away part of the business
leaves a business open to takeovers
shareholders receive dividends

31
Q

hire purchase

A

used to fund a specific purchase, such as equipment, the business never owns these items, but makes regular payments

32
Q

hire purchase advantages

A

expensive assets can be purchased and paid back over time

33
Q

hire purchase disadvantages

A

interest is charged on hire purchase items
equipment is not owned until the final payment is made

34
Q

leasing

A

involves renting machinery, equipment and vehicles, never owns , regular payment to owner of asset

35
Q

leasing advantages

A

no large upfront payments
leasing company may be responsible for repairs and maintenance

36
Q

leasing disadvantages

A

over time it can be a more expensive way to obtain assets
assets aren’t owned by the business

37
Q

trade credit

A

short term method of financing, to buy stock or materials, 30 days to pay

38
Q

trade credit advantages

A

access to supplies without immediate payment
no interestt

39
Q

trade credit disadvantages

A

short term, must be paid off quickly
usually small amounts

Business Y10 (4 decks)

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