Chapter 5.1 Flashcards
(44 cards)
What is startup capital?
Money needed to buy assets to start trading.
Why do businesses need finance for expansion?
To buy more machines, factories, or open new stores.
What is working capital?
Money needed for day-to-day costs like rent, wages, and bills.
What is retained profit?
Profit kept in the business after paying the owners.
Advantage of retained profit?
No interest and no repayment needed.
Disadvantage of retained profit?
May not be enough money available.
What is sale of assets?
Selling things the business no longer uses, like old machines.
Advantage of selling assets?
No debt or interest involved.
Disadvantage of selling assets?
Takes time and may not raise enough money.
What are personal savings?
Money from the owner’s own account.
Advantage of personal savings?
No interest or repayment needed.
Disadvantage of personal savings?
Might not be enough to fund the business.
What is issuing shares?
Selling part of the company in exchange for money.
Advantage of issuing shares?
Raises large money quickly, no interest.
Disadvantage of issuing shares?
Loss of some control and shareholders want dividends.
What is a bank loan?
Borrowing money from the bank that must be repaid with interest.
Advantage of a bank loan?
Large amount of money available.
Disadvantage of a bank loan?
Interest must be paid, and collateral may be needed.
What is collateral?
Something valuable offered as security for a loan.
What are debentures?
Long-term loans issued by companies to raise money.
Disadvantage of debentures?
Interest must be paid even if profits are low.
What is hire purchase?
Buying assets and paying in parts over time.
Advantage of hire purchase?
Own the asset after final payment.
Disadvantage of hire purchase?
High interest payments.
