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Business Btech > Unit 3 Learning Outcome D > Flashcards

Unit 3 Learning Outcome D Flashcards

1
Q

What is retained profit?

A

Profit that was kept in the business to fund future ideas.

Retained profits are profits not distributed to shareholders, used for reinvestment in the business.

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2
Q

What are two advantages of using retained profits?

A
  • No interest charges
  • Immediately available
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3
Q

What are two disadvantages of using retained profits?

A
  • Limited amounts
  • Payments are reduced to shareholders
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4
Q

What are net current assets?

A

Current assets minus current liabilities, indicating how much money the business actually owns.

This metric helps in assessing a company’s short-term financial health.

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5
Q

What is an advantage of managing net current assets?

A

Encourages the business to manage their cash flow.

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6
Q

What is a disadvantage of using net current assets?

A

Can negatively affect relationships as shorter credit terms are offered.

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7
Q

What is the sale of assets?

A

Selling something that a business owns to immediately gain money.

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8
Q

What is an advantage of selling assets?

A

No interest.

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9
Q

What is a disadvantage of selling assets?

A

Reduces capital tied to useful assets.

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10
Q

What is owner’s capital?

A

Funding the business from the owner’s personal finances.

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11
Q

List two advantages of using owner’s capital.

A
  • No interest payments
  • No repayment schedule
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12
Q

List two disadvantages of using owner’s capital.

A
  • Limited amount available
  • Personal finances are at risk
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13
Q

What is a loan?

A

Money lent to an individual or business, which is later paid off with interest.

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14
Q

What are two advantages of using loans?

A
  • No loss of ownership
  • Easy to budget as repayments are prearranged
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15
Q

What are two disadvantages of using loans?

A
  • Interest charged
  • Collateral required
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16
Q

What is crowdfunding?

A

When many people invest in capital to start a business.

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17
Q

What is an advantage of crowdfunding?

A

No interest paid.

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18
Q

What is a disadvantage of crowdfunding?

A

Finance is received from a number of investors, which can complicate management.

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19
Q

What is a mortgage?

A

A long-term loan secured against property.

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20
Q

List two advantages of mortgages.

A
  • Large amounts of finance can be acquired
  • No loss of ownership or control of the business
21
Q

List two disadvantages of mortgages.

A
  • Interest charged on the amount borrowed
  • Not suitable for short-term needs
22
Q

What is venture capital?

A

Investment in new businesses in exchange for a share of profits and some control.

23
Q

List two advantages of venture capital.

A
  • Finance is made available along with advice and mentoring
  • Easier to obtain as venture capitalists are high reward, high risk
24
Q

List two disadvantages of venture capital.

A
  • Loss of ownership and control
  • Conflicts may occur over how the business is run
25
Q

What is debt factoring?

A

Selling invoices to a third party at a discounted price to improve cash flow.

26
Q

What is an advantage of debt factoring?

A

Improves the business cash flow.

27
Q

What is a disadvantage of debt factoring?

A

Only receive a percentage of the amount the business is owed.

28
Q

What is hire purchase?

A

Purchasing an asset with a deposit and paying the remaining amount in installments.

29
Q

List two advantages of hire purchase.

A
  • Regular payments that are good for budgeting
  • Spreads out the cost of the asset
30
Q

List two disadvantages of hire purchase.

A
  • Likely to cost more than buying outright
  • Only suitable for lower cost items
31
Q

What is leasing?

A

Renting an asset that the business requires without owning it.

32
Q

List two advantages of leasing.

A
  • Spreads the cost of the asset
  • Maintenance and repairs are the owner’s responsibility
33
Q

List two disadvantages of leasing.

A
  • Likely to cost more than buying outright
  • Payments are forever, and the business never owns the asset
34
Q

What is trade credit?

A

A credit agreement where the business pays suppliers later.

35
Q

List two advantages of trade credit.

A
  • Helps with cash flow due to delayed payments
  • No loss of ownership or control
36
Q

List two disadvantages of trade credit.

A
  • Lose discounts for paying cash
  • Short-term source of finance
37
Q

What are grants?

A

Fixed amounts of money awarded by the government or charitable organizations.

38
Q

List two advantages of grants.

A
  • Don’t have to pay it back
  • No interest
39
Q

List two disadvantages of grants.

A
  • Have to meet certain conditions
  • Takes a long time to reply
40
Q

What are donations?

A

Funds given to non-profit organizations without the need for repayment.

41
Q

List two advantages of donations.

A
  • No need to repay
  • No interest charged
42
Q

List two disadvantages of donations.

A
  • Amount available to borrow may be limited
  • Short-term source
43
Q

What is peer-to-peer lending?

A

Borrowing from individuals or organizations, where the lender receives interest.

44
Q

List two advantages of peer-to-peer lending.

A
  • Interest rates can be lower
  • Easier to budget
45
Q

List two disadvantages of peer-to-peer lending.

A
  • Amount available to borrow may be limited
  • Short-term source
46
Q

What is invoice discounting?

A

A short-term borrowing method against outstanding invoices to improve cash flow.

47
Q

What is an advantage of invoice discounting?

A

No need to repay.

48
Q

What is a disadvantage of invoice discounting?

A

Negatively impacts cash flow.

Business Btech (6 decks)

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