Sources Of Finance Flashcards
Define mortgage
This is a long term source of finance
It is a sum of money borrowed from the bank that is secured against a property and paid back in instalments
Define bank loan
This is a long term source of finance
It is a fixed amount of money that is given to a business by the bank that has to be repaid over time with interest, usually in monthly instalments
Define Bank Overdraft
A facility that will allow you to withdraw more money from your account than is available. This is a short term source of finance
Define Retained Profits
Profits which have been made by the business in previous years which is invested back into the business
Define hire purchase
Used to purchase an asset
A deposit is paid and the remaining value is paid in monthly instalments over a set period of time. Business does not own the item until all payments are made
Define grant
Fixed amount of money usually awarded by the government, EU or charitable organisations. Grants are given on the basis that the business meet certain criteria such as providing jobs in an area of high employment
Define Venture Capital
Money that investors provide to a company that is starting up or expanding
Usually used when there is an element of risk with the business
Define share issue
When a PLC or LTD decides to issue more shares in the company and obtain finance from their sale
Define debentures
Long term source of finance issued by a limited company. Debentures are sold on the stock market. Total debenture value is repaid on a specific date in the future
State the term that describes debenture holders
Creditors
State who issues Grants to an org.
Government
EU
Charitable organisation
State a disadvantage with Hire Purchase
Business does not own item until all the payments have been made
Interest can be charged on payments for the asset
