business (finance) Flashcards
(14 cards)
describe the cash flow diagram
need for cash outflows e.g. materials and salleries goods produced (out) goods sold (in) cash payment for goods restart
name some inflows
investment
profit
shareholders
name some outflows
staff
distribution (transport)
bills / rent
examples of internal sources of finance
personal savings share capital retained profit sale of assets hire purchase
examples of external sources of finance
over draft or loan
trade credit
grants
venture capital
what are key financial concerns
cost of idea to business
running costs
revenue expected is received
why do businesses need finance
get started
by equipment
expansion
wages and salaries
how long is short term finance
1 year or less
how long is middle term finance
1 - 3 years
how long is long term finance
3 years +
what are the pros of trade credit
effectively “free finance”
flexible (business can chose when to repay)
commonly available and expected
significant
what are the cons of trade credit
wrong to abuse the suppliers good will
sometimes cannot be repaid if items are not sold
prosecutions
can bankrupt small businesses
why is it a problem for a small business is a major customer refuses to pay trade credit or is late?
can be main source of income, and so asking for money may result in them relocating to another company and leaving the business with a decline of revenue or being unable to cover other costs.
why do banks demand collateral before they provide a bank loan
so that they are guarantied their money back if someone cannot afford to pay the load.
they get it back through the collateral which are high value assets which cover the cost of the loan replacement
