Theme 2: Raising finance Flashcards
Fixed costs
Those that do not change as the number of sales change (for example, rent or salaries)
Variable costs
Those that do not change in line with the amount of business (for example, the cost of buying new raw materials)
Working capital
The finance available for the day-to-day running of the business
Angel investors
Investors who back a business before it has opened its doors, taking a full equity risk, i.e. if it fails the angel investor will lose everything invested
Collateral
An asset used as security for a loan. It can be sold by a lender if the borrower fails to pay back a loan
Crowdfunding
Obtaining external finance from many individual, small investments, usually through a web-based appeal
Public Limited Company (PLC)
A company with limited liability and shares, which are available to the public. Its shares can be quoted on the stock market
Seedcorn capital
The early stage (sowing a seed) finance that might come from an angel investor
Share capital
Business finance that has no guarantee of repayment or of annual income, but gains a share of the control of the business and its potential profits
Stock market
A market for buying and selling company shares. It supervises the issuing of shares by companies. It is also a second-hand market for stocks and shares
Venture capital
High-risk capital invested in a combination of loans and shares, usually in a small, dynamic business
Bankrupt
When an individual is unable to meet personal liabilities, some or all of which can be as a consequence of business activities
Creditors
Those owed money by a business - for example, suppliers and bankers
Limited liability
Owners are not liable for the debts of the business; they can lose no more than the sum they invested
Sole trader
A one-person business with unlimited liability
Unlimited liability
Owners are liable for any debts incurred by the business, even if it requires them to sell all their assets and possessions and become personally bankrupt
Best case
An optimistic estimate of the best possible outcome - for example, if sales prove much higher than expected
Business plan
A document setting out a business idea and showing how it is to be financed, marketed and put into practice
Cash flow forecast
Estimating future monthly cash inflows and outflows, to find out the net cash flow
Just-in-time
Ordering stock so that it arrives just before it is needed, just in time, i.e. having no stockpiles to cover for late deliveries
Overdraft
Short-term borrowing from a bank. The business only borrows as much as it needs to cover its daily cash shortfall
Worst case
A pessimistic estimate assuming the worst possible outcome - for example, sales are very disappointing
