topic 26 - sources of finance

Question 1

owners personal finance

Answer 1

includes personal savings and money borrowed from family and friends.

Question 2

retained profits

Answer 2

a business holding back profits from previous years.

Question 3

sale of assets

Answer 3

selling something that the business no longer needs.

Question 4

sell and lease back

Answer 4

selling an asset and leasing (renting) it back.

Question 5

share issue

Answer 5

selling shares in the business. PLCs sell on the stock market, Ltds sell shares privately.

Question 6

debentures

Answer 6

loans given to the business by individuals.

Question 7

bank overdraft

Answer 7

a facility which allows a business to spend more than is in its bank account.

Question 8

trade credit

Answer 8

allows a business to buy goods from suppliers and pay for them at a later date.

Question 9

debt factoring

Answer 9

a business sells its unpaid customer invoices to a factoring company. the factoring company then collects and keeps the customers debts.

Question 10

grants

Answer 10

money is given to a business from central or local government, the EU or the Prince’s Trust.

Question 11

bank loan

Answer 11

a bank agrees to lend a business money for a specific purpose, for a fixed period of time. regular repayment instalments are put in place.

Question 12

hire purchase

Answer 12

a business can buy an asset by paying an initial deposit and then monthly payments for a fixed period of time.

Question 13

mortgage

Answer 13

a large sum of money borrowed from a bank or building society secured on a property.

Question 14

venture capitalists

Answer 14

organisations that invest in established businesses in return for equity (ownership percentage).

Question 15

crowd-funding

Answer 15

small amounts of money from a large number of people are raised to fund a new business or a project. this is typically done via the internet, e.g. Kickstarter.