Theme 1 Notes

Question 1

5 sources of finance

Answer 1

Overdraft
Trade credit
Mortgage
Bank loans
Selling shares
Retained profit

Question 2

Unlimited liability

Answer 2

If business goes bankrupt then any money owed to suppliers or the bank can be recovered through possession of owners personal assets.

Question 3

Overdraft definition

Answer 3

An overdraft has higher interest rate but is more flexible and they can choose when to repay

Loan repayments are fixed and the business must make regular monthly payments

Question 4

Legal structure

Answer 4

Public limited
Limited
Unlimited
Partnership

Question 5

Venture capitalists

Answer 5

High risk nature with investment. High risk comes at a price. VA will demand high equity

Question 6

I have to be secured against an asset…

Answer 6

Mortgage

Question 7

Crowd funding

Answer 7

Using the internet to attract a significant numeric investors for small businesses

Question 8

Which part of a business plan is important to obtaining a bank loan?

Answer 8

Cash flow forecast as it shows the projected sales a business expects as well as a clear plan on how the loan repayments will affect their cash balance