Finance Flashcards
How are retained profits suitable for large organisations?
Can help with the business expansion
There is no interest to pay back
Can be spent in any way the owner sees fit
How are sale of assets suitable for large organisations?
Can then help with the business expansion
There is no interest to pay
Can be spent in any way the owner sees fit
Frees up cash that is tied down
How can bank loans be suitable for large organisations?
Loans are fairly quick and easy to arrange if the business is trusted by the bank
The business can spend the loan however it wishes but it is usually used for expansion
How can Grants be suitable for large organisations?
No repayment need to be made
Good image is generated as usually the business is helping out the local area
How can a Share issue be suitable for large organisations?
Large amounts of capital can be raised without interest
Shareholders have limited liability
How can debt factoring be suitable for a large organisation?
Improves cash flow
Protection against bad debts
How can Debentures be suitable in a large organisation?
Financial protection
Fixed interest rate
How can venture capital be suitable in a large organisation?
It enables businesses with a poor credit rating to obtain finance
How can crowd funding be suitable for a large organisation?
Access to a large amount of investors
Fast source of finance
How can a Mortgage be suitable for a large organisation?
Large amounts of finance can be raised quickly
Given for a long period of time
Uses of a Cash Budget to a business
To show to potential lenders and investors
To compare predicted spending with actual spending
To measure the performance of different departments and set targets
To show periods of surplus where cash can be put towards a project
Solutions to Cash flow problems
Offer discounts to customers for quicker payment Sell any unused assets Arrange overdraft/loan Cut costs Advertise to bring in more sales revenue
What is the purpose of an income statement?
Shows annual profit/ loss figure
Shows how much money has come into the business
What are the main elements of an income statement?
Trading Account
Profit and Loss Account
What is a Trading account?
This calculates the gross profit/ gross loss
The money made from buying and selling
It is calculated by sales- Costs of Sales
