Brainscape's Knowledge GenomeTM

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


See full index

Business- personal and business finance > Sources of finance- external > Flashcards

Sources of finance- external Flashcards

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

What are external sources of finance

A

Money received by a business from outside the business

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

Examples of external source of finance

A

Grants, Loan, Mortgage, peer to peer lending, donations, invoice discounting, hire purchase, leasing, venture capital, debt factoring, crowdfunding, owner’s capital, trade credit

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

Owner’s capital

A

Money invested into the business from the owner’s personal savings

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

Advantages of owner’s capital

A

No interest payments, no need to repay, high level commitment from the owner

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

Disadvantages of owner’s capital

A

Amount available may be limited, if there is more than one owner there ay be friction of they all cannot input the same amount

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

Loans

A

Money borrowed from a financial institution (bank) for a set period of time and for a specific purpose

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

Advantages of loans

A

Regular pre-agreed repayments make planning and budgeting easier, ownership and control is not lost

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

Disadvantages of loans

A

Interest is charges, interest rates may fluctuate, secured against an asset so if repayments are missed, an asset can be seized

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

Crowdfunding

A

Attracting investment from a number of investors who may invest relatively small amounts

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

Advantages of crowdfunding

A

Ability to raise finance from a large number of investors, no interest is paid

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

Disadvantages of crowdfunding

A

Partial loss of ownership, may not attract sufficient investments to meet the proposal

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

Mortgages

A

Long term loans that are secured against assets. Repaid over a long period of time, for a specific purpose (buy a property)

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

Advantages of mortgages

A

Large amounts of finance can be raised, no loss of ownership or control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Disadvantages of mortgages

A

Interest is charged, interest rates can fluctuate, secure against an asset, not suitable for small amounts

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

Venture capital

A

Investment made by an experienced entrepreneur in return for a stake

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

Advantages of venture capital

A

Finance is provided by a business professional who my offer advice and mentoring, they are normally risk takers who see potential in high risk investments

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

Disadvantages of venture capital

A

Partial loss of ownership and control, conflict may arise between the entrepreneur and the venture capitalist about day to day running of the business

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

Debt factoring

A

Selling on business debts in order to receive cash quickly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Advantages of debt factoring

A

Speeds up the flow of cash into business from debts, factor company takes risk of bad debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Disadvantages of debt factoring

A

Only receive a percentage of amount owed which reduces profits, may give wrong impression or alienate customers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Hire purchase

A

Paying to use an asset to spread the cost over its useful life

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Advantages of hire purchase

A

Avoids paying lump sum, regular instalments make planning and budgeting easier, spreads the cost over its useful life

23
Q

Disadvantages of hire purchase

A

Cost may be higher than if paid for outright, only suitable for low cost assets (vehicles not premises)

24
Q

Leasing

A

Paying to rent an asset, ownership of the asset stays with the supplier for the length of lease agreement

25
Q

Advantages of leasing

A

Responsible for maintaining and repairing the asset stays with the supplier, spreads the cost over its useful life, avoids paying lump sum upfront

26
Q

Disadvantages of leasing

A

Cost may be higher than if paid outright, never actual own the asset, payments are ongoing

27
Q

Trade credit

A

A period of time offered by suppliers to allow the customers to purchase a product/service but pay at a later date

28
Q

Advantages of trade credit

A

Delays the need to pay for goods/services which aids cash flow, no loss of ownership or control

29
Q

Disadvantages of trade credit

A

Potential loss of discounts offered for cash payments, only suitable as a short term source of finance

30
Q

Grants

A

Lump sum provided to a business by the government, used for a specific purpose

31
Q

Advantages of grants

A

No need to repay or pay interest charges, no loss of ownership or control

32
Q

Disadvantages of grants

A

lengthy application process, may only be awarding if the business meets certain criteria, affecting the way a business runs day to day

33
Q

Donations

A

Sums of money given voluntarily to a charity or social enterprise

34
Q

Advantages of donations

A

No need to repay or pay interest, no loss of ownership or control

35
Q

Disadvantages of donations

A

Unpredictable, likely to be small amounts only

36
Q

Peer-to-peer lending

A

One business person lending money to another business person in return for interest payments

37
Q

Disadvantages of peer to peer lending

A

Amounts available may be limited and provided for a short period of time only

38
Q

Advantages of peer to peer lending

A

Interest rates can be lower than lending from more traditional financial institutions, fixed rate of interest can be agreed making it easier to plan and budget

39
Q

Invoice discounting

A

Reductions offered to customers making a product/service cheaper

40
Q

Advantages of invoice discounting

A

No need to repay or pay interest charges, no loss of ownership or control, reduces cost to the business so increases profit

41
Q

Disadvantages of invoice discounting

A

Often only available if purchases are paid in cash which affects cash flow

42
Q

Is owners capital short or long term?

A

Short term

43
Q

Are loans short or long term

A

Long term

44
Q

is crowdfunding short or long term

A

Short term

45
Q

is mortgages short or long term

A

Long term

46
Q

Is venture capital short or long term

A

long term

47
Q

is debt factoring short or long term

A

Short term

48
Q

is hire purchase short or long term

A

long term

49
Q

is leasing short or long term

A

short term

50
Q

is trade credit short or long term

A

short term

51
Q

are grants short or long term

A

long term

52
Q

are donations short or long term

A

short term

53
Q

is peer to peer lending short or long term

A

short term

54
Q

is invoice discounting short or long term

A

short term

Business- personal and business finance (9 decks)

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