Sources Of Finance Flashcards
What is capital expenditure?
Spending on items that might be used over and over again.
What is revenue expenditure?
Payments for goods and services that have already been consumed, like wages.
What is Retained Profit?
Money made from sales and for goods.
What are the Internal Sources of Finance?
Sales of assets, Retained Profits, Owners Capital.
What is Sale of Assets?
Money made from the sale of goods.
What is Owners Capital?
Own personal savings.
What are the advantages of Retained Profit?
No interest, easy to access.
What are the disadvantages of Retained Profit?
Not guaranteed to have any, make shareholders angry.
What are the advantages of Owners Capital?
Flexible to use, easy to access.
What is the disadvantages of Owner’s Capital?
Limited amount, owner may be skeptical to use it.
What are advantages of Sales of Assets?
No loss or profit, removes any waste.
What are the disadvantages of Sales of Assets?
Could lose assets that are needed for the future.
What are the External Sources of Finance?
Crowd funding, venture capitalists, business angel, bank loan, share capital, leasing, grants, overdraft, high purchase.
What are grants?
Money funds from the government.
What is share capital?
Money obtained from selling shares.
What is leasing?
A contract where one party grants a right to use a property or land to another party in return for consideration and for a specific period of time.
What is an Overdraft?
An overdraft lefts you borrow extra money through your current account.
What are the advantages of share capital?
No dividends, can’t refund the shares.
What are the disadvantages of share capital?
Loses a percentage of control, vulnerable to a takeover.
What is a debenture?
A type of bond or long term loan which is issued by a company. An unsecured bond.
What is debt factoring?
When a business can raise cash by selling their outstanding sales invoice to a third-party as a discount.
What are the advantages of trade credit?
Allows to pay at a later date (quick,easy), interest free.
What are the disadvantages of trade credit?
Can cause debt if not payed back in time.
What are the advantages of venture capitalists?
Helps funds to start up, reduces chance of monopoly’s, can raise huge amount of capital.
What are the disadvantages of Venture Capitalists?
Ethical problems.
