The role of Credit in the Economy Flashcards
how do banks make money?
net interest margins, interchange fees, trading financial instruments, buying/selling currencies
what is collateral?
Something pledged as security for repayment of a loan to be forfeited in the event of going wrong.
what is risk?
Measuring the likelihood that a particular outcome may or may not occur
What is liability
being legally responsible for debts
how much liability do sole traders have?
Unlimited liability
how much liability do private limited companies have?
Limited liability (Shareholders share it)
name 3 sources of internal sources of finance
Owners equity, retained profit, sale of assets
how long can overdrafts go on for?
Short-term as interest rates are high
What may bank loans require
collateral
How long should leasing continue?
Medium-term (long term could be expensive)
how long until you have to pay back trade credit?
30-60 days
what was venture capital
Funding provided by specialists
is share capital/equities good short term?
No a long term commitment as requires profits/dividends
