Sources Of Finance

Question 1

What is capital expenditure?

Answer 1

Spending on items that might be used over and over again.

Question 2

What is revenue expenditure?

Answer 2

Payments for goods and services that have already been consumed, like wages.

Question 3

What is Retained Profit?

Answer 3

Money made from sales and for goods.

Question 4

What are the Internal Sources of Finance?

Answer 4

Sales of assets, Retained Profits, Owners Capital.

Question 5

What is Sale of Assets?

Answer 5

Money made from the sale of goods.

Question 6

What is Owners Capital?

Answer 6

Own personal savings.

Question 7

What are the advantages of Retained Profit?

Answer 7

No interest, easy to access.

Question 8

What are the disadvantages of Retained Profit?

Answer 8

Not guaranteed to have any, make shareholders angry.

Question 9

What are the advantages of Owners Capital?

Answer 9

Flexible to use, easy to access.

Question 10

What is the disadvantages of Owner’s Capital?

Answer 10

Limited amount, owner may be skeptical to use it.

Question 11

What are advantages of Sales of Assets?

Answer 11

No loss or profit, removes any waste.

Question 12

What are the disadvantages of Sales of Assets?

Answer 12

Could lose assets that are needed for the future.

Question 13

What are the External Sources of Finance?

Answer 13

Crowd funding, venture capitalists, business angel, bank loan, share capital, leasing, grants, overdraft, high purchase.

Question 14

What are grants?

Answer 14

Money funds from the government.

Question 15

What is share capital?

Answer 15

Money obtained from selling shares.

Question 16

What is leasing?

Answer 16

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.

Question 17

What is an Overdraft?

Answer 17

An overdraft lefts you borrow extra money through your current account.

Question 18

What are the advantages of share capital?

Answer 18

No dividends, can’t refund the shares.

Question 19

What are the disadvantages of share capital?

Answer 19

Loses a percentage of control, vulnerable to a takeover.

Question 20

What is a debenture?

Answer 20

A type of bond or long term loan which is issued by a company. An unsecured bond.

Question 21

What is debt factoring?

Answer 21

When a business can raise cash by selling their outstanding sales invoice to a third-party as a discount.

Question 22

What are the advantages of trade credit?

Answer 22

Allows to pay at a later date (quick,easy), interest free.

Question 23

What are the disadvantages of trade credit?

Answer 23

Can cause debt if not payed back in time.

Question 24

What are the advantages of venture capitalists?

Answer 24

Helps funds to start up, reduces chance of monopoly’s, can raise huge amount of capital.

Question 25

What are the disadvantages of Venture Capitalists?

Answer 25

Ethical problems.