Sources of Finance Flashcards Preview

Business // Production, Finance and the External Business Environment > Sources of Finance > Flashcards

Flashcards in Sources of Finance Deck (21):
1

Grants

An amount of money made available for a purpose. It doesn't have to be paid back

2

Owner investment

The existing owners of the business may invest more money into it

3

Cash in Bank

Money owned by the business and up overtime following a successful trading

4

Share issue

A source of finance used by limited companies to raise finance in return for a "share". This is usually for major expansion.

5

Retained profit

Profit that the owner could either keep, reinvest, or create dividends

6

Sale of assets

Turning something that the business sells into cash. The assets that are sold may no long be needed by the business.

7

Mortgage

A very long-term method of borrowing money which requires some form of security. This is usually to purchase a property

8

Overdraft

An arrangement with the business' bank where the business withdraws more money than it actually has. This is usually to help a business overcome a temporary shortage of funds. The bank account goes into a minus balance

9

Bank loan

Money borrowed from the bank in order to start up the business or to expand.

10

Leasing

Where the business borrows items from another business, which is usually given back later.

11

Hire purchase

Where a business buys items in return for a monthly payment over a certain amount of time. They do not become the owner of the until the final payment

12

Taking on a new partner

Partnerships can obtain additional finance by selling off part of the new business to a new partner

13

Trade credit

When a business sells good to a business without them having to pay straight away. This normally 30, 60 or 90 days.

14

Short term of sources of finance

-Cash in bank
-Overdraft
-Trade credit

15

Medium term of sources of finance

-Retained profit
-Sale of assets
-Bank loan
-Leasing
- Hire purchase
-Grants

16

Long term sources of finance

-Owner investment
-Retained profit
-Mortgage
-Bank loan
-Leasing
-Hire purchase
-Taking on a new partnet

17

Internal finance

Comes from within the business

18

External finance

Comes from outside of the business

19

Examples of internal finance

-Retained profit
-Sale of assets
-Taking on a new partner
-Owner investment
-Cash in bank

20

Examples of external finance

-Grants
-Share issue
-Mortgage
-Overdraft
-Bank loan
-Leasing
-Hire purchase
-Taking on a new partner
-Trade credit

21

Opportunity costs

The cost of missing out of something else. In this case, if the business uses the finance to develop new products they cannot also pay for new products