Influences on Financial Management Flashcards
(34 cards)
Internal sources of Finance
These are sources of finance that are from inside the business. These include retained profits, Capital contributed by owner’s and sale of business assets.
What is the owner’s equity?
Funds contributed by the owner to build the business
Retained profit
The business keeps profit for future needs
Sale of business assets
In order to achieve internal sources of Finance, businesses can have a sale of unwanted assets.
External sources of Finance
Funds that are from outside the business. There are two types Equity and Debt.
What is debt?
Payment that a business obtains that is issued a promise of repayment on certain date at a specific rate of interest. This is a tax deduction for the business.
Short- term borrowing
Debt that is borrowed in the short term, to solve short term issues. These include overdraft, commercial bills and factoring.
What is an overdraft?
loan arrangement with bank. allows the business to draw more money than it has in its account. interest is charged daily. claimed as a tax deduction.
Commercial bill
Written order for loan amount that is guaranteed by the business’s bank. The money is borrowed from other companies that have surplus funds.
Factoring
The cash sale of a businesses accounts receivable at a discount to a factoring company.
Long- term borrowing
loan that has a term of repayment longer than 12 months. Non current liability.
Mortgage’s
Loans from a the bank or business lender, that has a long repayment period.
Debentures
issued by a company for a fixed rate of interest and for a fixed period of time.
Unsecured notes
issued by finance companies to gain funds. they do not provide any claim over assets over the business and they are not secured.
leasing
A contract allowing use of another person’s asset for a specific period of time and at a set fee.
What is equity
Funds invested by owner’s and refer to the ownership of shares in a incorporated business
Private equity
An incorporated business that invites specific people to become part owner’s by selling shares in the business.
How does the government influence financial management?
With economic policies who are responsible for monitoring and administration.
What is the ASIC’S
The Austrailan Securities and Investment commission.
What is the ASIC’S
Independent independent statutory commission accountable to the commonwealth parliament. It enforces and administers the corporations ACT 2001 and protects consumers in the areas of investments, life and general insurance, superannuation and banking in Australia,
ordinary shares
Means that individuals can become part- owners of a public listed company.
Banks
- major operator in financial markets
- Most important source of funds for businesses
Investment banks
Investment banks deal with businesses and governments.
Finance companies
non- bank financial intermediaries that specialise in smaller commercial finance.
