Raising Finance

Question 1

What are the benefits of a bank loan?

Answer 1

Long time to pay back

Low interest

Question 2

What are the drawbacks of a back loan?

Answer 2

Interest to pay

Unlimited liability

Question 3

What are the benefits of an overdraft?

Answer 3

Flexible

Help cash flow

Question 4

What are the drawbacks of an overdraft

Answer 4

High intrest

Question 5

What is a business angel?

Answer 5

An individuals who use their personal wealth to provide capital to start-up and early-stage businesses in return for a share of the company’s equity.

Question 6

What are the benefits of a business angel?

Answer 6

Give knowledge & contacts

No repayment

Question 7

What are the drawbacks of a business angel?

Answer 7

Hard to find

Loss of control

Question 8

What are the benefits of crowdfunding?

Answer 8

No repayment

No intrest

Question 9

What are the drawbacks of crowdfunding?

Answer 9

Take a while to raise money

Must reach target

Question 10

What are the drawbacks of raising money through family/friends?

Answer 10

Hard to persuade

Personal fall out

Question 11

What are the advantages of using share capital?

Answer 11

Large amount raised

Gain money world wide

Question 12

What are the disadvantages of using share capital?

Answer 12

loss of control

Could be taken over

Question 13

What is a venture capitalist?

Answer 13

An individual who invests in a business in return for a % of the business ownership

Question 14

What are the benefits of a venture capitalist?

Answer 14

Gain knowledge/contacts

Advice given

Question 15

What are the drawbacks of a venture capitalist?

Answer 15

loss of control

Investor has control

Question 16

Benefits of leasing?

Answer 16

Helps with budgeting

Question 17

Drawbacks of leasing?

Answer 17

Don’t own equipment

Puts pressure on outflows

Question 18

Benefits of trade credit?

Answer 18

Slows down outflows

Less likely to go bankrupt

Question 19

Drawbacks of trade credit?

Answer 19

Unethical

hard to get for small companies

Question 20

Benefits of grants?

Answer 20

Reduce unemployment

No repayments

Question 21

Drawbacks of grants?

Answer 21

Only accessed by companies that are ethical

Question 22

What is the calculation for opening balance?

Answer 22

Last months closing balance

Question 23

What is the calculation for closing balance?

Answer 23

Opening balance + NCF

Question 24

What is the calculation for NCF?

Answer 24

Inflows - Outflows

Question 25

Examples of Inflows? (6)

Answer 25

``` Sales revenue Receivables (debetors) Loans Share capital Intrest Business angel/venture capitalist ```

Question 26

Examples of outflows? (6)

Answer 26

``` Payables (Creditors) Utilities wages mantensie Rent Corporation tax ```

Question 27

What happens if a company over invests in fixed assests?

Answer 27

Too many/too high outflows

Question 28

What happens if a business has too much stock?

Answer 28

Too many/too high outflows

Question 29

What happens if a business gives customers too much trade credit?

Answer 29

Slows down inflows

Question 30

What does seasonal demand do to a business?

Answer 30

Fluctuates inflows & outflows

Question 31

What happens if a business over trades too quickly (grows)?

Answer 31

Unmatched inflows & outflows

Question 32

What is a cash flow forecast?

Answer 32

A document that predicts the cash flowing into the business and out of the business