Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business > Topic 2.1 Raising finance > Flashcards

Topic 2.1 Raising finance Flashcards

Mrs Hudson

1
Q

What is internal finance?

A
  • Money from within the business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sources of internal finance

A
  • Personal savings
  • Retained profits
  • Sale of assets
  • Owners capital
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Reasons why businesses need to raise finance

A
  • To buy supplys/technology
  • To expand and grow
  • To break even
  • To pay bills/debts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Benefits of internal finance

A
  • No money to pay back with intrest
  • money is easily available
  • Doesn’t Involve third parties who may want to influence decision making
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Drawbacks of internal finance

A
  • May charge intrest on finance`
  • Once the moment has been used it is gone
  • The amount of money may not be sufficient
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Retained profits

A
  • Involves re-investing their profits into the business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Benefits of Retained profits

A
  • Doesn’t cost the business anything to obtain the finance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Drawbacks of Retained profits

A
  • May not be a sufficient amount of finance
  • Newer businesses won’t have much
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Sale of assets

A
  • Selling items that the business owns eg. machinery, land
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Benefits of the Sale of assets

A
  • Doesn’t cost the bussiness anything to obtain the finance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Drawbacks of the Sale of assets

A
  • May take a while for the assets to sell
  • No longer have access to the assets
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is external finance?

A
  • Finance that is sourced from outside the business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Advantages of External finance

A
  • Can speed up expansion
  • Supports uneven cash flow
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Disadvantages of External finance

A
  • Higher intrest rates
  • Decreased control
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Family and friends

A
  • When family and friends give or loan you money
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Advantages of family and friends

A
  • You stay in control of your business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Disadvantages of family and friends

A
  • Could cause disputes
  • May have to pay therm intrest
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Bank loans

A

When a bank provides you with. larger sum of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Advantages of bank loans

A
  • Still have full control over your business
  • Offers short and long term finance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Disadvantages of bank loans

A
  • Usually requires a business plan
  • Money needs to be paid back with intrest
  • lengthy and strict criteria
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Peer to peer funding

A
  • Unsecured loans eg. Student loans, pay day loans
22
Q

Advantages of Peer to peer funding

A
  • Quicker and easier than a bank
  • Remain in full control
23
Q

Disadvantages of Peer to peer funding

A
  • Limited availability - may not be available in certain locations or to certain borrowers
  • Have to pay intrest
24
Q

Angel investment

A

When other people use their personal savings to invest into your business

25
Q

Advantages of Angel investment

A
  • Brings in expertise/ knowledge
  • Willing to take larger risks than banks eg. smaller businesses
26
Q

Disadvantages of angel investment

A
  • Want shares in your business
27
Q

Crowdfunding (Donations)

A

A - Do not need to be paid back
D - usually only for social enterprises as they don’t make a profit

28
Q

Crowd funding (Lenders)

A

Getting money back with intrest and the satisfaction of helping a small business

29
Q

Crowdfunding (Investment)

A

In exchange for shares which may increase in value

30
Q

Ordinary share capital

A
  • Raised through selling shares
31
Q

Advantages of Ordinary share capital

A
  • Can raise large amounts of finance
  • Lower risk of bankcruptcy
32
Q

Disadvantages of Ordinary share capital

A
  • lose control of your business
  • They get a share of your profits
33
Q

Venture capital

A
  • Getting outside investment as the business is unable to raise money through the stock market
34
Q

Advantages of Venture capital

A
  • Helpful if a business struggles to raise finance through other methods
35
Q

Disadvantages of Venture capital

A
  • Can loose control of the business
  • High expectations and pressure
36
Q

Overdraft

A

Allows the business to seemed money that it doesn’t have in its account

37
Q

Advantages of an Overdraft

A
  • Allows the business to pay bills and wages even if they dont have sufficient cash
  • Quick and easy
38
Q

Disadvantages of an Overdraft

A
  • Have to pay the money back with intrest
  • No repayment plan so easy to fall into debt
39
Q

Leasing

A

When one business rents and asset types another one in return for regular payments

40
Q

Advantages of leasing

A
  • No long term commitments
  • Lower monthly payments
41
Q

Disadvantages of leasing

A
  • More expensive in the long run than just buying the asset
  • More complicated
42
Q

Trade credit

A

An agreement made with suppliers that’s allows businesses to purchase raw materials but pay for them at a later date eg. 30-90 days after

43
Q

Advantages of trade credit

A
  • Usually intrest free
  • Improves cash flows
44
Q

Disadvantages of trade credit

A
  • Risk of late payment fees
  • Expensive if payment date is missed
45
Q

Government grants

A

A sum of money that is given to your business from the government

46
Q

Advantages of Government grants

A
  • ## Not expected to be repaid
47
Q

Disadvantages of Government grants

A
  • Must meet specific criteria
  • Only given a percentage of the cost of your project
48
Q

Unlimited liability

A
  • Fully responsible for the debts of the business
  • Can loose their personal assets
49
Q

Limited liability

A
  • Can only loose the original amount they put into the business
50
Q

Advantages of a cash flow forecast

A
  • Identify when the business may go through periods of cash shortfalls or cash supluses
  • Help aid planning so they can avoid costly mistakes
51
Q

Disadvantages of a cash flow forecast

A
  • Based on estimates
  • ## Time consuming and require highly skilled workers to create them
52
Q

Business plans and obtaining finance

A
  • Business plan will reduce the risk associated with starting up a business
  • Businesses have to think through everything
  • Shows investors that they have done their research
  • Helps select the most appropriate source of finance

Business (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions