sources of finance

Question 1

owners capital

Answer 1

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

Question 2

owners capital advantages

Answer 2

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

Question 3

owners capital disadvantages

Answer 3

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

Question 4

sale of an asset

Answer 4

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

Question 5

advantages of sales of an asset

Answer 5

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

Question 6

disadvantages of sale of an asset

Answer 6

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

Question 7

retained profit

Answer 7

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

Question 8

retained profit advantages

Answer 8

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

Question 9

disadvantages retained profit

Answer 9

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

Question 10

over draft

Answer 10

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

Question 11

overdraft advantages

Answer 11

quick access
allows emergency purchases

Question 12

overdraft disadvantages

Answer 12

high interest rates
is only a short term solution

Question 13

bank loan

Answer 13

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

Question 14

bank loan advantages

Answer 14

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

Question 15

bank loan disadvantages

Answer 15

have to pay interest
difficult for a new business to access

Question 16

friends/family loan

Answer 16

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

Question 17

friends/family loan advantages

Answer 17

low interest
money may not need to be paid back

Question 18

friends/family loan disadvantages

Answer 18

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

Question 19

grant

Answer 19

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

Question 20

grant advantages

Answer 20

does not need to be paid back
available to small businesses

Question 21

grant disadvantage

Answer 21

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

Question 22

venture capitalist / business angels

Answer 22

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

Question 23

venture capitalists/ business angel advantages

Answer 23

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

Question 24

venture capitalists/ business angel disadvantages

Answer 24

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

Question 25

new partner

Answer 25

good way of helping fund investment

Question 26

new partner advantages

Answer 26

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

Question 27

new partner disadvantages

Answer 27

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

Question 28

share issue

Answer 28

able to raise extra finance by selling shares

Question 29

share issue advantages

Answer 29

can gain lots of money quickly no interest payable

Question 30

share issue disadvantages

Answer 30

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

Question 31

hire purchase

Answer 31

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

Question 32

hire purchase advantages

Answer 32

expensive assets can be purchased and paid back over time

Question 33

hire purchase disadvantages

Answer 33

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

Question 34

leasing

Answer 34

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

Question 35

leasing advantages

Answer 35

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

Question 36

leasing disadvantages

Answer 36

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

Question 37

trade credit

Answer 37

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

Question 38

trade credit advantages

Answer 38

access to supplies without immediate payment no interestt

Question 39

trade credit disadvantages

Answer 39

short term, must be paid off quickly usually small amounts

Question 40

Gross profit

Answer 40

total rev - cost of goods sold

Question 41

GPM

Answer 41

gross profit/sales X100

Question 42

NPM

Answer 42

net profit/sales X100

Question 43

Net profit

Answer 43

gross profit- expenses

Question 44

reasons for changes in net and gross profit

Answer 44

-Sales Revenue has increased or decreased * Costs of Goods Sold have increased or decreased * Expenses have increased or decreased.

Question 45

turnover calculation

Answer 45

: Selling Price × Quantity Sold

Question 46

net cashflow

Answer 46

Total Inflow – Total Outflow

Question 47

opening balance

Answer 47

The cash available to a business at the start of a month, carried over from the closing balance of the previous month.

Question 48

closing balance

Answer 48

= Opening Balance + Net Cash Flow

Question 49

ways to improve cashflow position

Answer 49

- reducing staff - buying cheaper materials -increasing promotions - delay payments - extra funding

Question 50

business advice

Answer 50

- Bank - Business wales - Princess trust

Question 51

what advice can banks give you?

Answer 51

- help and support - wealth planning - pension scheme - mortgages

Question 52

what advice can business wales give

Answer 52

- recruitment - skills - growing your business

Question 53

what advice can the princess trust give

Answer 53

- civil legal advice give - funding to train and learn

Question 54

what does gross profit margin show?

Answer 54

looks at the % sales that is gross profit

Question 55

what does net profit margin show?

Answer 55

looks at the % sales that is net profit

Question 56

cashflow forecast

Answer 56

it is a prediction of the cashflow

Question 57

cashflow statement

Answer 57

factual based on actual figures

Question 58

why is creating a cashflow online easier?

Answer 58

because if there are changes to be made you can change 1 figure and it will all change but on paper you would have to rewrite