3.5.3 Making financial decisions: sources of finance

Question 1

A source of finance

Answer 1

This refers to the way in which a business raises the finance that it needs for some activity

Question 2

Internal source of finance

Answer 2

This is one that exists within the business

Question 3

An external source of finance

Answer 3

This is an injection of funds into to the business from individuals, other businesses or financial institutions

Question 4

Debt factoring

Answer 4

This is where businesses buy the customer bills from a business and offer immediate cash in return for a percentage cut

Question 5

An overdraft

Answer 5

This exists when a business is allowed to spend more than is in their account up to an agreed limit

Question 6

Retained profits

Answer 6

This is the profit that is made by the business that is kept and can be reinvested back into the business

Question 7

A bank loan

Answer 7

This is an amount of money provided to a business for a stated purpose in return for a payment in the form of interest charges

Question 8

Share capital

Answer 8

This is finance invested into a company as a result of selling shares in the business

Question 9

Venture capital

Answer 9

These are funds given to businesses to be relatively high risk in the form of share or loan capital

Question 10

Short-term finance

Answer 10

This is finance needed for a limited period of time, normally less than one year

Question 11

Long-term finance

Answer 11

These are those sources of finance that are needed over a longer period of time, usually over a year