Ch.19- Business finance: needs and sources Flashcards
Start-up capital
The capital needed by an entrepreneur when first starting a business
Working capital
The capital needed to finance the day-to-day running expenses and pay the short-term debts of a business
Non-current (fixed) assets
Resources owned by a business which will be used for a period longer than 1 year
Capital expenditure
Spending by a business on non-current assets such as machinery and buildings
Long-term finance
Debt or equity used to finance the purchase of non-current assets or finance expansion plans. Long-term debt is borrowing a business doesn’t expect to repay in less than 5 years
Short-term finance
Loans or debt that a business expects to pay withing one year
Retained profit
Profit remaining after all expenses, tax and dividends have been paid and which is ploughed back into the business
Overdraft
An agreement with the bank which allows a business to spend more money that it has in its account up to an agreed limit. The loan has to be repaid within 12 months
Trade receivables
Amount owed to a business by its customers who bought goods on credit
Debt factoring
Selling trade receivables to improve business liquidity
Bank loan
Provision of finance by a bank which the business will repay with interest over an agreed period of time
Leasing
Obtaining the use of a non-current asset by paying a fixed amount per time period of time. Ownership remains with the leasing company.
Hire purchase
The purchase of an asset by paying a fixed repayment amount per time period over an a period of time. The asset is owned by the company on the completion of the final repayment.
Mortage
A long-term loan used for the purchase of land or buildings
Debenture
A bond issued by a company to raise long-term finance usually at a fixed rate of interest