Theme 2: S1 raising finance Flashcards
(15 cards)
What is capital?
The money invested in a business to fund its operations and growth, including owners capital and borrowed funds.
Define internal finance?
Finance generated from withinthe business, such as retained profit, sales of assets, or owners capital.
Give 3 examples of internal finance.
Retained profit, sales of unwanted assets, and personal savings (owners capital).
Define ‘external finance’.
Finance sources from the outside business, such as loans, overdrafts, or venture capital.
What is a bank loan?
A fixed sum borrowed from a bank, repaid with interest over a set period. Often used for long-term investments.
What is an overdraft?
A short-term borrowing facility that allows a business to spend more than it has in its account, usually with high interest.
What is venture capital?
Investment from venture capitalists in exchange for equity (ownership). Used for high-risk, high-potential businesses.
Define crowdfunding.
Raising small amounts of money from a large number of people, typically via online platforms.
What is a business plan and why is it important for raising finance?
A document outlining a business’s objectives and strategies. Leaders and investors use it to assess risk and viability.
What is limited liability?
When the owners are only legally responsible for business debts up to the amount they invested- common in ltd’s and PLCs.
What is unlimited liability?
When the owner is personally responsible for all debts- common in sole traders and partnerships.
What is share capital?
Money raised by selling shares in a company. It is only available to limited companies.
Define trade credit.
A form of short term finance where suppliers allow the business to buy now and pay later.
What is leasing?
Renting equipment or property instead of buying it outright, helping preserve cash flow.
What are the 3 key sections in a cash flow forecast?
Inflows, outflows, and net cash flow. It helps predict the timing and the amount of cash available.
