finance

Question 1

What are some short term sources of finance

Answer 1

retained profit
sale of an asset
Government grants
Bank overdrafts
Trade credit
Factoring

Question 2

What is retained profit

Answer 2

This is the amount of profit held back by the company rather than paid as dividends, which is reinvested in the company to achieve growth

Question 3

What is the sale of an asset

Answer 3

It is when the firm sells off a piece of equipment that it is not using.

Question 4

What is a government grant

Answer 4

This is a large sum of money that the firm applies for from the government. it does not have to be paid back.

Question 5

What is a bank overdraft

Answer 5

the bank allows the firm to exceed the funds they have in the bank. Interest is still paid.

Question 6

What is trade credit

Answer 6

When a supplier delivers supplies to the firm and allows them to pay for the goods at a later date.

Question 7

What is a hire purchase

Answer 7

When a firm will hire equipment and pay for its instalments.

Question 8

What is Leasing

Answer 8

When a firm rents a building or piece of equipment for an agreed period of time.

Question 9

What are the Medium sources of finance

Answer 9

Hire purchasing
Leasing
Bank loan

Question 10

What are the long term sources of Finance

Answer 10

Mortgage
Owners savings
Share issue
Crowd funding

Question 11

What is a mortgage

Answer 11

This is a loan given to firms who wish to purchase premises and is repaid in instalments with interest.

Question 12

What are the owners savings

Answer 12

This is the funds saved by the owner and invested into the business

Question 13

What is crowd funding

Answer 13

This is where a firm will fund by raising money from a large number of people who each contribute a relatively small amount.

Question 14

What are some advantages to crowd funding

Answer 14

Firm can use it to gauge interest of a product
Lessenes the risk of an idea failing
Can be free advertising
Can raise lots of money

Question 15

Disadvantages to crowd funding

Answer 15

vulnerable to negative comments
Scammers
Not everyone will invest

Question 16

What is a share issue

Answer 16

this is where the firm releases more shares in the business to either existing shareholders or new shareholders.

Question 17

What is a venture capitalist

Answer 17

These are private investors who provide finance where banks decide it is too risky.

Question 18

What is a debenture

Answer 18

A group of companies will give the plc a long term loan to be repaid with fixed interest for a period of time.

Question 19

Pros of share issue

Answer 19

Avoids interest payments
Money doesn’t need to be paid back when firm.

Question 20

What are some some disadvantages to share issue

Answer 20

Control could be lost as a result

Question 21

What are some causes of cash flow problems

Answer 21

Low sales
Too much money tied in inventory
An increase in expenses

Question 22

What is the impact of cash flow problems

Answer 22

Unable to pay suppliers so inventory is not delivered and production stops.
Unable to pay wages
May have to lower prices to increase sales.

Question 23

How can an organisation overcome cash flow problems

Answer 23

Offer special discounts on selling price.
Arrange for an overdraft or bank loan
Sell an asset or the business, possibly to leaseback.

Question 24

What can a cash flow forecast tell a manager

Answer 24

How much cash is available for paying bills, loans and other expenses.
When the business will have a deficit and cash flow problems may occur.

Question 25

What is the formula for Gross profit %

Answer 25

Gross profit/ sales revenue x 100