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Business, Technology and Finance > 5. Sources of finance > Flashcards

5. Sources of finance Flashcards

1
Q

In not for profit (NFP) organisations, what are the three E’s that often used instead?

A
  1. Effectiveness
  2. Economy (reduction of cost)
  3. Efficiency
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2
Q

A performance measure is only useful if what?

A

If compared with something else

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3
Q

Define critical success factors (CSFs)

A

Product features that are particularly valued by a group of customers, and therefore, where the organisation must excel to outperform the competition

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4
Q

One way of setting Key Performance Indicators is to use benchmarking- how is this defined?

A

The establishment, through data gathering, of targets and comparators, through who use relative levels of performance can be identified

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5
Q

Beyond financial performance reporting frameworks, accountants can use the triple bottom line of SEE factors. What does this stand for?

A

Social
Environmental
Economic

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6
Q

What does GRI stand for?

A

Global reporting initiative

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7
Q

What is the Natural Capital Protocol?

A

A standardised framework for businesses to use, developed by the Natural Capital Coalition, when assessing natural capital

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8
Q

What is the CDSB framework?

A

The Climate Disclosure Standards Board framework is for ensuring that information about natural capital is given the same prominence as financial capital in a company’s reports

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9
Q

What does CSR stand for?

A

Corporate Social Responsibility

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10
Q

What is a balanced scorecard?

A

An integrated set of performance measures linked to achievement of strategic objectives

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11
Q

From what four perspectives does the balanced scorecard look at?

A
  1. Customer
  2. Internal business processes (e.g. product quality)
  3. Innovation and learning (e.g. employee retention rates)
  4. Financial (e.g. gross margin)
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12
Q

Debt holders face ______ risk but ____ returns on their capital

A

Lower, lower

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13
Q

Equity holders face ______ risk but ____ returns on their capital

A

Higher, higher

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14
Q

What is financial intermediation?

State a benefit of it

A

Where banks take deposits from customers and then use those funds to lend money to other customers

  1. Small amounts deposited by savers can be combined to provide larger loan packages to businesses
  2. Short-term savings can be transferred into long-term borrowings
  3. Search costs are reduced as companies seeking loan finance can approach a bank directly rather than finding individuals to lend to them
  4. Risk is reduced as an individual’s savings are not tied up with one individual borrower directly
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15
Q

What does EFT stand for?

A

Electronic Funds Transfer

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16
Q

What does CHAPS stand for?

What items does it cover?

A

Clearing House Automated Payment System

It covers items of at least £10,000 and provides same-day clearing

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17
Q

What does SWIFT stand for?

A

Society for Worldwide Interbank Financial Telecommunication

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18
Q

What is the aim of monetary stability?

A

To meet a target for overall inflation in the economy

19
Q

What two authorities does the Bank of England use to ensure the financial stability of the UK’s financial system?

A
  1. Financial Policy Committee (macro prudential responsibility)
  2. Prudential Regulation Authority (regulation of firms)
20
Q

What is the difference between primary banks and secondary banks?

A

Primary bank: those which operate the money transmission service in the economy, operating cheque accounts and deal with cheque clearing

Secondary bank: made up of merchant banks and other banks, which do not take part in the clearing system

21
Q

What are a customer’s two duties to the bank?

A
  1. Draw up cheques carefully to avoid facilitating fraud

2. Report known forgeries to the bank

22
Q

Does the bank have a right to use the customer’s money in any way provided that it is legal and morally acceptable?

A

Yes

23
Q

Define marketable securities

A

Short-term, highly liquid investments

24
Q

What is the minimum investment for a treasury bill?

A

£50,000

25
Q

Define commercial paper

A

IOUs issued by large companies which can be either held to maturity or sold
To third parties before maturity

26
Q

Capital markets provide a source of ______ for business and an _____ route for investors

A

Funds, exit

27
Q

What is the difference between a primary and secondary market?

A

Primary market: new sources of finance

Secondary market: for securities already in issue

28
Q

Preference shares usually carry ___ voting rights and have no right to share in ______ profits

A

No, excess

29
Q

Give an advantage and disadvantage of going public

A

Advantages:
Gives access to large source of finance
Improved marketability of shares, increasing value of company
Higher security therefore easier to raise finance

Disadvantages: 
High costs 
Dilution of control 
Need to have traded for three years 
Greater scrutiny 
Having to answer investors 
Possibility of take over 
Extra costs of control and reporting systems to meet the increased demands on the company
30
Q

What is debt factoring?

A

Where a business receives loan finance and insurance so that in the event the customer does not pay, the business does not have to repay the loan

31
Q

Define a term loan

A

A loan where the repayment date is set at the time of borrowing and is not repayable on demand

32
Q

What is loan stock?

A

Debt capital in the form of securities issued by companies, the government and local authorities

33
Q

What is a lease arrangement?

A

Under a lease arrangement, the purchaser pays the owner of an asset a regular payment for the right to use the asset for a particular period of time

34
Q

What is the essential difference between a finance lease and operating lease?

A

Finance lease: purchasing an asset when it is required

Operating lease: essentially rental of an asset

35
Q

A large business can access money markets, borrowing large amount on a ____-______ basis

A

Short-term

36
Q

Define securitisation

A

The pooling of relatively small, homogeneous and illiquid financial assets, which liquid assets and which are sold to other institutions

37
Q

Define venture capital

A

The provision of risk-bearing capital to companies with high growth potential

38
Q

What are three ways can a venture capitalist exit their investment?

A
  1. Sale of shares/company
  2. Flotation
  3. Buyback of shares on refinancing
39
Q

Give an advantage of the Alternative Investment Market (AIM)

A
  1. Less stringent regulations

2. Lower entry costs

40
Q

What is a bill of exchange?

A

A document that is drawn up by the exporter and sent to the overseas buyer’s bank, which accepts the obligation to pay the bill by signing it

41
Q

What is a letter of credit?

A

A method of payment in international trade which gives the exporter a risk-free method of obtaining access payment. The exporter receives immediate payment and the buyer has a period of credit

42
Q

What is export credit insurance?

A

Insurance against risk of non-payment by foreign customers for export debts

43
Q

What are green bonds?

A

Any type of bond instrument where the proceeds will be exclusively used to finance green projects

Business, Technology and Finance (9 decks)

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