sources of finance Flashcards

1
Q

what is short term finance

A

money borrowed for one year or less

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2
Q

what is long term finance

A

money borrowed for more than one year

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3
Q

what is capital

A

finance provided by the owners to a business

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4
Q

what is internal finance

A

finance generated by the business from its own means

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5
Q

what is retained profit

A

profit held by the business without returning to the owners, used for future needs

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6
Q

what is startup capital used for

A

to cover initial expenditures like purchasing non-current assets

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6
Q

what is external finance

A

finance obtained from outside the business

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7
Q

why might a business need short term finance

A

to cover expenditures when revenues are insufficient

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7
Q

why might a business need long term finance

A

for startup or ongoing trading, often funded by owner’s capital or financial institutions

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8
Q

why might a business need finance for expansion

A

to meet large orders or grow operations

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9
Q

what is an example of internal finance

A

personal savings, retained profits, or selling off assets

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10
Q

what is the cheapest source of finance and why

A

retained profits, as it has no interest or additional costs

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11
Q

what is a bank overdraft

A

allows businesses to spend more than they have, with a limit and interest charges

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12
Q

how do trade payables work

A

businesses can purchase on credit, paying suppliers later (30–90 days)

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13
Q

what is loan capital

A

funds borrowed with regular repayment installments and interest

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14
Q

what is an unsecured bank loan

A

a loan with no security, typically with higher interest rates

15
Q

what is a mortgage

A

a long-term loan secured against property or land

16
Q

what is a debenture

A

a fixed-interest loan secured against assets, repaid when it matures

17
Q

what is hire purchase

A

borrowing tools or equipment instead of purchasing them outright, often with a down payment

17
Q

what is venture capital

A

investment from specialists for high-growth potential businesses, often sharing profits

18
Q

what is share capital

A

raising funds by selling shares, with potential dividend expectations

19
Q

what is crowd funding

A

raising money from a large number of people via online platforms with no interest payments