Unit 28 - Liability Flashcards
Def: collateral
An asset that might be sold to pay a lender when a loan cannot be repaid
Def: incorporated business
A business model, where the business and the owners have separate legal identities
Def: limited liability
A legal status that means shareholders can only lose the original amount they invested in a business
Def: long-term finance
Money borrowed for more than one year
Def: Rights issue
Issuing new shares to existing shareholders at a discount
Def: short term borrowing
Money borrowed for 12 months or less
Def: under capitalised
A business not raising enough capital when setting up
Def: unincorporated business
A business model in which there is no legal difference between the owners and the business
Def: unlimited liability
A legal status which means that business owners are liable for all business debts
Examples of unlimited liability
Soul trader and partnerships
Examples of limited liability businesses
Private Limited companies Ltd and public limited companies PLC
What factors should be considered when choosing appropriate finance?
Weather short-term or long term
The financial position of the business
What’s the money will be spent on
Costs
Legal status of the business
Finance appropriate for unlimited liability businesses
Personal saving
Retained profit
Mortgages
Unsecured bank loans
Peer peer funding
Crowd funding
Bank overdraft
Grants
Finance appropriate for limited liability businesses
Share capital
Retained profit
Venture capitalists
Business angels
And more
