Ch.19- Business finance: needs and sources Flashcards

1
Q

Start-up capital

A

The capital needed by an entrepreneur when first starting a business

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2
Q

Working capital

A

The capital needed to finance the day-to-day running expenses and pay the short-term debts of a business

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3
Q

Non-current (fixed) assets

A

Resources owned by a business which will be used for a period longer than 1 year

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4
Q

Capital expenditure

A

Spending by a business on non-current assets such as machinery and buildings

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5
Q

Long-term finance

A

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

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6
Q

Short-term finance

A

Loans or debt that a business expects to pay withing one year

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7
Q

Retained profit

A

Profit remaining after all expenses, tax and dividends have been paid and which is ploughed back into the business

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8
Q

Overdraft

A

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

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9
Q

Trade receivables

A

Amount owed to a business by its customers who bought goods on credit

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10
Q

Debt factoring

A

Selling trade receivables to improve business liquidity

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11
Q

Bank loan

A

Provision of finance by a bank which the business will repay with interest over an agreed period of time

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12
Q

Leasing

A

Obtaining the use of a non-current asset by paying a fixed amount per time period of time. Ownership remains with the leasing company.

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13
Q

Hire purchase

A

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.

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14
Q

Mortage

A

A long-term loan used for the purchase of land or buildings

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15
Q

Debenture

A

A bond issued by a company to raise long-term finance usually at a fixed rate of interest

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16
Q

Share issue

A

A source of permanent capital available to limited liability companies

17
Q

Equity finance

A

Permanent finance provided by the owners of a limited company

18
Q

Micro-finance

A

Small amounts of capital loaned to entrepreneurs in countries where business finance is often difficult to obtain. These loans are usually repaid after a relatively short period of time

19
Q

Crowd-funding

A

Financing a business idea by obtaining small amounts of capital from a large number of people, most often using the internet and social media networks.