external sources of finance

Question 1

short term sources =

Answer 1

• overdraft
• trade credit
• factoring

Question 2

overdraft (1 pro and 1 con)

Answer 2

pro: only pay interest when account is overdrawn
con:interest charged can be very high

Question 3

Trade credit

Answer 3

pro: 30-90 days offered by suppliers
con: suppliers offer discounts for cash or early payment

Question 4

factoring

Answer 4

pro: pay a proportion of the value of an invoice
con: offered to businesses with a good trading record and reliable customers

Question 5

Long term sources

Answer 5

• loans / mortgages
• leasing
• sale of shares
• venture capitalists
• grants

Question 6

Loans / Mortgages (1 pro and 1 con)

Answer 6

pro: money is immediately available
con: interest has to be payed

Question 7

Leasing

Answer 7

pro: use of resources without the need of a large sum of money
con:can be very expensive over a long period of time

Question 8

sale of shares

Answer 8

pro: does not have to be repaid
cons: loss of control

Question 9

venture capitalists

Answer 9

pro: possibly large sums of money quickly
con: expect to be fully involved with the business

Question 10

Grants
(WAG welsh assembly government )

Answer 10

pro:not to be repsaid
con: tend to be small amounts