2.1 - Raising Finance Flashcards
(21 cards)
Economic variables
Features of an economy which have effects on business and
consumers eg unemployment, inflation and exchange rates
Internal finance w/ examples
The raising of capital/cash from within/inside the business e.g. business/owner’s capital, personal savings, retained profit
Retained profit (internal)
Profit is re-invested back into/kept by the business which is not paid as a dividend
Sale of assets (internal)
Involves selling resources that belong to the b
Bank Loan (external)
Finance/money borrowed from a bank paid back, with interest (over a period of time)
Business Angels (external)
Individuals who invest in a business in exchange for a stake in the business (shares)
Crowdfunding (external)
Where large number of individuals can provide direct funding for a business or project which is administered by a website
Grant
A sum of money given by a government or other organisation. It does not need to be repaid and no interest is charged
Leasing
A contract to acquire the use of resources such as property or
equipment
Loan
An external source/method; amount of money borrowed, usually repayable after a fixed term of more than 12 months
Overdraft
When a business has a negative balance in their bank account because the amount withdrawn is greater than the current balance
Peer-to-peer funding
When a person lends money to other individuals or businesses via
online transactions
Trade credit
Where a firm receives stock/inventory/raw materials from a supplier, which it does not have to pay for until later
Venture capital (external)
When the business issues shares to a small number of investor(s) in return for a capital injection into the company
Liability
An obligation to pay another person/lender/supplier
Limited liability
The obligation of a shareholder for the debts of a business is limited to
the value of their investment
Unlimited liability
The obligation of a business owner to cover all the debts of the business
Business plan
A document which details how the business is going to develop over a period of time. Includes elements like a forecast of cash flow and profit
Cash flow forecast
The predicted flow of cash into and out of a business over a period of time
Closing balance
Net cash flow + open balance
Net cash flow
Cash inflows - cash outflows
