Company Finance Flashcards
Role of finance in business? (4)
- Capital
- Revenue
- Profit
- Assets
What is capital?
resources a company has, can be phisical or monetary
initial capital - the starting money
What is revenue/sales?
What the company gets when the costumer buys things/products/services
What is profit?
Revenue - Expenses
What are assets?
2 types
ANYTHING THE COMPANY OWNS
- fixed assets: used for a long time (more than a year), raise the value of the company, can be used as collatoral, pl. machines for a factory
- current assets: anything that is used for a shorter period (less than a year)
What is expenditure?
2 types
MONEY SPENT IN THE COMPANY
- capital expenditure: major purchases that are usually capitalized on a company’s balance sheet instead of being expensed, fixed assets, raise the value of the company
- revenue expenditure: day-to-day expenses, it comes from what the company generates, pl. salaries, rent, material costs
What is liquid and illiquid assets?
- liquid: when you can turn the asset into money easily
- illiquid: an asset that cannot be quickly converted to cash
Internal sources of funding? (3)
- personal funds
- Retained profit (Net profit - dividend)
- Sale of assets
External sources of funding? (6)
- share capital/equity capital - coming from the shareholders: IPO or share issue
- loan capital: fixed vs variable/floating interest rate, mortgage, business development loan, bond vs debenture (coupon, current yield or nominal yield)
- trade credit
- grant or subsidy
- venture capitalist or business angel
-
crowdfunding- usually very specific:
1. peer-to-peer lendning
2. equity crowdfunding
3. rewards-based crowdfunding
4. donation-based crowdfunding
Factors influencing the choice of finance? (7)
- purpose of funds
- cost
- status and size
- amount required
- flexibility
- State of external environment
- gearing/leveraging (the debt in terms of loans)
