2.1 Defintions

Question 1

Owner’s Capital

Answer 1

When an entrepreneur invests their own money in a business eg; from personal savings

Question 2

Retained profit

Answer 2

Profit kept within the business from profit after tax to help finance future activity

Question 3

Sale of assets

Answer 3

A method of raising short term finance by disposing of business assets in return for cash

Question 4

External finance

Answer 4

The ability to raise funds from sources outside of the business.These include: bank loans and overdrafts, venture capital, crowd funding and business Angels

Question 5

Peer-to-peer funding

Answer 5

The practise of an individual lending to other individuals (peers) with whom there is no relationship or contact

Question 6

Business Angels

Answer 6

Wealthy individuals making personal investments into start up businesses in return for a share of the business ie; percentage equity

Question 7

Crowd funding

Answer 7

This is when a business venture is funded by raising small amounts of money from lots of people eg; through the Internet

Question 8

Loans

Answer 8

When a lender provides capital (money) to borrower and the borrower agrees to repay the borrowed money, with interest, over a period of time

Question 9

Share capital

Answer 9

Money raised from the sale of shares which is used to fund the future activities of a business

Question 10

Venture Capital

Answer 10

Investment from an established business person or business into a new business in return for a percentage equity in the new business

Question 11

Overdrafts

Answer 11

The pre- agreed facility to overspend on a current account,up to an agreed sum

Question 12

Leasing

Answer 12

Contract that allows the renting of assets from another party eg;lease premises, equipment,land ect

Question 13

Grants

Answer 13

Fixed amounts of capital provided to a business by the government or other organisations to fund specific projects

Question 14

Trade credit

Answer 14

An arrangement by a business to provide good s and services on account eg; 30 days

Question 15

Liability

Answer 15

The extent to which an investor is legally responsible for the debts of a business. It can be limited and unlimited

Question 16

Limited liability

Answer 16

The investor is only responsible for the debt up to the amount they have invested or promised to invest

Question 17

Unlimited liability

Answer 17

The investor is responsible for all of the debts of the business and therefore at risk for losing their own personal possessions

Question 18

Shareholders

Answer 18

Investors who are part owners of a company and receive a dividend, which is a share of the profit in return for their investment

Question 19

Dividends

Answer 19

A percentage of profit paid to shareholders as a reward for their investment

Question 20

Business plan

Answer 20

A document that describes Hal an entrepreneur proposes to set up a new business ; (finance,marketing,HR and operations) in order to relieve external finance

Question 21

Cash-flow forecast

Answer 21

The movement of cash in and out of a business over a period of time

Question 22

Internal Finance

Answer 22

Funds used within a business to fund expansion or growth eg; retained profit