2.3 - Managing Finance Flashcards
1
Q
Why do businesses raise finance?
A
- Pay debts
- Help a business over a slow trading period
- Expansion
- Start-up a business
- Buy stock
2
Q
Types of internal finance
A
- Owners capital
- Retained profit
- Sale of assets
3
Q
Types of external finance
A
- Bank loans
- Peer loans
- Angel investing
- Crowd funding (large number of people fund by donating, lending, investing)
- Trade credit
- Government grants
- Venture capital
4
Q
Gearing ratio
A
Loan capital/capital employed x 100
- Measure how reliant a firm is on borrowed money
- High gearing means higher interest costs
- May affect; value of dividends, ability to obtain more borrowed funds
5
Q
Gross profit
A
Sales revenue - costs of sales
6
Q
Gross profit margin
A
Gross profit/ sales revenue x 100
7
Q
Operating profit
A
Gross profit - expenses
8
Q
Operating proftit margin
A
Operating profit/sales revenue x 100
9
Q
Net profit
A
Operating profit - interest
10
Q
Net profit margin
A
Net profit/sales revenue x 100
