Topic 2 Flashcards
What are sources of finance?
Options available to a business when seeking to raise funds to support future business actions
What are the two different sources of finance?
Internal and external
What is owners capital?
How much the owner has invested in the business
What are Benefits of owners capital?
- do not have to repay
- no interest charges
- owner maintain control
- risking own savings can be motivational
- do not have to go through any lengthy application process
Negatives of owners capital?
- may only be limited amounts available
- threat to personal finances and family
What are retained profits?
Profit kept within a business from profit for the year to help finance future activities
Benefits of retained profit?
- Avoids interest repayments
- does not dilute the business ownership
What are disadvantages of retained profit?
- Only an option if sufficient retained profit exists within the business
- may cause shareholder dissatisfaction
What is sale of assets?
Sale of a long term or fixed assets
What are benefits of sale of assets?
- no interest charges or repayments
- may be turning an obsolete asset into finance
- immediate lump sum cash injection
What are negatives of sale of assets?
- May be expensive in the Long run if need to lease the asset back
- loss of use of the asset and future value
- is only a one off option
What is a source of finance?
Where finance is coming from
What is a method of finance?
How finance is provided
What are different sources of finance?
- family and friends
- banks
- peer to peer funding (P2P)
- business angels
- crowdfunding
- other businesses
What are the different methods of finance?
- loans
- share capital
- venture capital
- overdraft
- leasing
- trade credit
- grants
