Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Management of Finance > Sources of finance > Flashcards

Sources of finance Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 65 flashcards Series 63 flashcards Series 66 flashcards Series 7 Top-off Exam flashcards SIE Exam flashcards CFA flashcards Series 79 Top-Off Exam flashcards
1
Q

How can finance dept help improve business success

A
  • provide accurate financial
  • make good decisions
  • monitor performance
  • control costs
  • forecast trends
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what will the source of finance depend on

A
  • finance available
  • how long it is for
  • purpose
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is bank overdraft

A

used for short term cash flow difficulties when more money is taken from an account that is in it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what are the advantages of bank overdraft

A
  • interest paid only on amount borrowed

- agreed limit can be pre-arranged so it is available when needed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what are the disadvantages of bank overdraft

A
  • extra charges applied

- higher charges if unauthorised

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is trade credit

A

buy now pay later

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what are the advantages of trade credit

A
  • can sell goods before having to pay supplier

- prevents cash flow problems

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what are the disadvantages of trade credit

A
  • cash discount lost

- poor reputation if late payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what is a grant

A

money given to a business from government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what’s the advantages of a grant

A
  • don’t have to pay back

- no loss of business control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are the disadvantages of a grant

A
  • time consuming to apply

- conditions apply so only for certain projects

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is a bank loan

A

borrowing money over a specific time, repaying in fixed instalments with added interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what are the advantages of a bank loan

A
  • no need to save up as once it is approved the money is available
  • sizeable amount can be approved
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what are the disadvantages of bank loan

A
  • interest payable so increase cost

- inflexible

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what is commercial mortgage

A

loan from bank or building society to buy a land or property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what is the advantages of commercial mortgage

A
  • large amounts allowing things to be afforded

- pay back over years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what are the disadvantages of commercial mortgage

A
  • variable interest rates so costs may rise

- property can be repossessed if payments aren’t made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what is debt factoring

A

unpaid customer invoices to a debt factor to chase up for a small price

19
Q

what are the advantages of debt factoring

A
  • improves cash flow as the cash is received immediately

- saves time and money as nothing is needed to be chased up

20
Q

what are the disadvantages of debt factoring

A
  • business doesn’t receive full amount, loss of income

- factor is only interested in large values

21
Q

what is retained profit

A

profits made previously which is kept for reinvestment

22
Q

what are the advantages of retained profits

A
  • no additional costs or interest

- instantly available

23
Q

what are the disadvantages of retained profit

A
  • takes time to save up so it’s difficult to find large growth quick
  • no guarantee that profits will be made
24
Q

what is selling assets

A

selling off unwanted assets to raise finance

25
Q

what is leasing

A

paying a fee to ‘rent’ something from a company

26
Q

what are advantages of leasing

A
  • no need to buy expensive things

- don’t pay repairs

27
Q

what are the disadvantages of leasing

A
  • business never owns assets

- may be more expensive than buying over time

28
Q

what is hire purchasing

A

paying the cost of equipment in regular instalments

29
Q

what are the advantages of hire purchasing

A
  • cost is spread over time making it more affordable

- becomes an asset and eventually owned

30
Q

what are the disadvantages of hire purchasing

A
  • finance company owns asset till payment

- interest can be expensive

31
Q

what is crowd funding

A

appeal for funding from the public

32
Q

what are advantages of crowd funding

A
  • raises funds quite quickly

- can raise awareness of new business

33
Q

what are the disadvantages of crowd funding

A
  • if target isn’t reached money often needs returned

- may not be accepted into crowd funding platform

34
Q

what is new equity

A

limited company sell new shares to investors for part of the ownership of the business

35
Q

what are the advantages of new equity share issue

A
  • large sums can be raised by selling shares

- no need to repay as the share is sold onto third party

36
Q

what are the disadvantages of new equity share

A
  • takes time and costs to arrange sale

- limit to number of shares that can be issued

37
Q

what is debentures

A

loans from individuals or companies to PLCs with a fixed interest rate and repayment date

38
Q

what are the advantages of debentures

A
  • large amounts can be raised

- easier to plan for as fixed interest rate and long term

39
Q

what are the disadvantages of debentures

A
  • interest must be paid even if a loss is made

- assists have to be sold to repay loan

40
Q

what is venture capital

A

investor provides finance to riskier ventures

41
Q

what are advantages of a venture capital

A
  • allows business plans to be put into operation

- may be willing to lend even if a bank has refused a loan

42
Q

what are disadvantages of a venture capital

A
  • often only interest in large amounts

- part ownership may need to be agreed so there’s a loss of control

43
Q

what are the different sources of finance

A 
bank overdraft
trade credit
grant
bank loan
commercial mortgage
44
Q

what are the sources of finance needed to be known at higher

A 
dept factoring
retained profit
selling assets
leasing
hire purchase
crowd funding
new equity share issue
debentures
venture capital

Management of Finance (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions