Sources Of Finance Flashcards
1
Q
What is finance?
A
Finance is money or other liquid resources used to fund a business
2
Q
Why is there a need for finance?
A
- to start up the business (capital)
- to run the business (operating costs)
- to expand the business (marketing)
3
Q
What are the difficulties in raising finance?
A
- start ups are seen as a risk
- competition for investment
4
Q
What are internal sources of finance ?
A
Funds found inside the business
5
Q
Advantages of retained profit?
A
- no interest
- sustainable
6
Q
Disadvantage of retained profit?
A
- small funds
7
Q
Advantages of share capital?
A
- long term
- guaranteed to get money back
8
Q
Disadvantages of share capital
A
- dividends are paid to shareholders
9
Q
Advantages of sale and leaseback
A
- gain cash from sales
- can still use asset
10
Q
Disadvantages of sale and leaseback
A
- unsustainable
11
Q
What are external sources of finance?
A
Finance found outside the business
12
Q
Advantages of bank loan
A
- instant cash
- not losing ownership
13
Q
Disadvantages of bank loan
A
- high interest rates
- difficult to obtain
