Sources of finance

Question 1

What is sales of assets

Answer 1

A fixed asset such as machinery or premises that the business owns, is sold.

Question 2

What is the sales of assets use for

Answer 2

Buying expansion or replacement capital equipment and for development purposes

Question 3

Advantages of sales assets and disadvantage

Answer 3

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.

Question 4

What is an overdraft

Answer 4

An arrangement with a bank that the business can spend more money than it has in its bank account

Question 5

What is an overdraft used for

Answer 5

Day to day expenses such wages, stock, bill ( for new and established businesses)

Question 6

Advantages and disadvantage of an overdraft

Answer 6

Advantage- cash meet short-term cash flow problems business can continue trading in the short term.

Disadvantages - Interest is changed on the daily amount of money that the business owes to the bank

Question 7

What is the trade credit

Answer 7

When the business does not need to pay the supplier for goods for a period of time (often 30 days)

Question 8

What is trade credit used for

Answer 8

Buying new stock or raw materials ( new and established business)

Question 9

Trade credit advantages and disadvantages

Answer 9

Advantage- source of finance allows the business to buy the goods to sell them on a customer before the payment is made to the supplier.

Disadvantage- Goods must be paid for even is they do not sell.
Interest is charged if the credit is not repaid within the time limit.