sources of finance Flashcards
what is sales of assets
a fixed asset such as machinery or premises that the business owns, is sold
what is sales of assets used for
buying expansion or replacement capital equipment and for development purposes
advantages of sales assets and disadvantage
advantage- Good if the assets is no longer of your use to the business
disadvantage- can take time to sell the asset
may not be possible to find a buyer
what is an over draft
an arrangement with a bank that the business can spend more money than it has in its bank account
what is an overdraft used for
day to day expenses such as wages, stock, bill (for new and established businesses)
advantages and disadvantage of an overdraft
advantage- can meet short-term cash flow problems
business can continue trading in the short term
disadvantage- interest is charged on the daily amount of money that the business owes to the bank.
what is trade credit
the business does not need to pay the supplier for goods for a period of time (often 30 days)
what is trade credit used for
buying new stock or raw materials (new and established business)
trade credit advantages and disadvantages
advantage- source of finance allows the business to buy the goods to sell them on to a customer before payment is made to the supplier
it helps the businesses that may have a temporary shortage of funds
disadvantage- the goods must be paid for even if they do not sell
interest is charged if the credit is not repaid within the time limit
what is taking on a new partner
a partner contributes finance to a business
what is taking on a new partner used for
buying expansion and development and replacing capital equipment
