Finance Flashcards
Give Sources of Finance?
Donations Bank Loan Government Grant Owners Funds Retained Profits Bank Overdraft Hiring and Leasing Share Issue Selling Assets Venture Capital Factoring Trade Credit
Give Advantages of Owners Credit.
1 The money doesn’t need to be repaid
2 No interest needs to be paid
Give Disadvantages of Owners Credit.
1 They may not have enough money.
Give Advantages of a Bank Loan.
1 The money can be obtained in one lump sum
2 Repayments can be spread over several years
Give Disadvantages of a Bank Loan.
1 The loan must be repaid - with interest
Give Advantages of Overdraft
1 Useful as a short term source of finance to overcome cash flow problems
2 You are not tied into an agreement which requires repayment over several years.
Give Disadvantages of Overdraft
1 An expensive form of borrowing with high interest charges and costs especially if the facility is not arranged in advance.
Give Advantages of a Mortgage
1 Amount can be repaid over many years e.g. 25 years
Give Disadvantages of a Mortgage
1 Repayments may be high due to high interest rates
2 If repayments are not made then the property may be repossessed .
Give Advantages of a Government Grant
1 The money doesn’t have to be repaid
2 A large amount of money can be received at one time
Give Disadvantages of a Government Grant
1 There may be certain restrictions as to what the money can be used for.
Give Advantages of Re-Invested Profits
1 There are no extra costs e.g. interest to be paid for.
Give Disadvantages of Re-Invested Profits
1 There may be insufficient money to fund the business.
Give Advantages of Hire Purchase
1 Allows businesses to buy assets with only a small initial payment
2 Once full payments have been made the asset is owned
Give Disadvantages of Hire Purchase
1 The asset is not fully owned until the last payment is made
2 The total paid is more than the price of the asset.
