Finance topic !

Question 1

what is a debenture ???

Answer 1

loans borrowed from individuals through the stock market

Question 2

what is good about debentures

Answer 2

• retain control of company

- can be paid back over a long period of time

Question 3

what is bad about debentures

Answer 3

interest must be paid annually, even if a loss is made

Question 4

what is debt factoring

Answer 4

a business sells its unpaid customer invoices to a factoring company. The factoring company then collects and keeps the customers’ debts

Question 5

what is good about debt factoring

Answer 5

• responsibility for collecting debt is passed on, saving time and effort
• cash flow is improved by receiving an advanced payment of the debts

Question 6

what is bad about debt factoring

Answer 6

• the business has to sell the customer debt for a reduced amount so it may receive less money than it is actually owed
• factoring companies are usually only interested in large amounts of debt so may not be appropriate for all businesses

Question 7

what is a business angel

Answer 7

individuals who invest in start up businesses in return for equity

Question 8

whats good about business angels

Answer 8

• business advice is often provided as well as finance

- business angels are willing to take risks

Question 9

whats bad about business angels

Answer 9

• they have equity so have a stake in the business which means a loss of control and profits
• this is only suitable for smaller amounts of investment for new businesses

Question 10

whats a venture capitalist ???

Answer 10

organisations that invest in established businesses in return for equity .

Question 11

whats bad about venture capitalists?

Answer 11

giving up control and profits!!!

Question 12

whats good about venture capitalists

Answer 12

• large amounts of money can be gained

- venture capitalists are more likely to take on more risky investments than banks

Question 13

7 reasons why cash budgets are important !?

Answer 13

• plan
• command
• delegate
• organise
• coordinate
• control
• motivate

Question 14

describe the purpose of a statement of financial position

Answer 14

• to state the value of the organisation
• informs decision making
• to compare to with competitors
• used by investors / potential investors to determine the possible return on their investment
• legal requirement