sources of finance Flashcards
what is short term finance
money borrowed for one year or less
what is long term finance
money borrowed for more than one year
what is capital
finance provided by the owners to a business
what is internal finance
finance generated by the business from its own means
what is retained profit
profit held by the business without returning to the owners, used for future needs
what is startup capital used for
to cover initial expenditures like purchasing non-current assets
what is external finance
finance obtained from outside the business
why might a business need short term finance
to cover expenditures when revenues are insufficient
why might a business need long term finance
for startup or ongoing trading, often funded by owner’s capital or financial institutions
why might a business need finance for expansion
to meet large orders or grow operations
what is an example of internal finance
personal savings, retained profits, or selling off assets
what is the cheapest source of finance and why
retained profits, as it has no interest or additional costs
what is a bank overdraft
allows businesses to spend more than they have, with a limit and interest charges
how do trade payables work
businesses can purchase on credit, paying suppliers later (30–90 days)
what is loan capital
funds borrowed with regular repayment installments and interest
what is an unsecured bank loan
a loan with no security, typically with higher interest rates
what is a mortgage
a long-term loan secured against property or land
what is a debenture
a fixed-interest loan secured against assets, repaid when it matures
what is hire purchase
borrowing tools or equipment instead of purchasing them outright, often with a down payment
what is venture capital
investment from specialists for high-growth potential businesses, often sharing profits
what is share capital
raising funds by selling shares, with potential dividend expectations
what is crowd funding
raising money from a large number of people via online platforms with no interest payments