Theme 2 Flashcards
What is owner’s equity?
The stake the owner has in the business
What is retained profit?
The business holds onto profits for at least a year and re-invests them (not a start-up)
What is sale of assets?
The business sells any assets they already own to raise finance, usually something they no longer need
What types of business can raise finance through friends and family?
Sole trader, partnership and private limited company
How can banks help finance a business?
Loans, overdraft
What is peer to peer funding? (P2PL)
Unsecured loans not going through a book
What is an angel investor?
Someone using their own disposable finance and making an investment into the business. They will also bring their expertise to help grow the business.
What are the 3 crowdfunding methods?
Donate, Lend, Invest
What is venture capital (private equity finance)?
Essentially a business angel, however they invest at least £50,000 and it’s a company doing so
What is trade credit?
The buyer has time to sell their goods and raise money before paying their supplier
What are government grants?
A body of government giving money to a business in order to either boost this sector or to combat unemployment, this doesn’t need to be paid back
Define Limited Liability
If the business has debts the owners are only liable for the amount of their original investment
Define Unlimited Liability
If the business has debts the owners are liable for the full amount and may need to sell their own assets to cover payments
