Unit 3.1 - Sources Of Finance

Front 1

Section 3 - Accounts and Finance
Unit 3.1 - Sources of Finance

Back 1

Section 3 - Accounts and Finance
Unit 3.1 - Sources of Finance

Front 2

Define fixed assets

Back 2

Items of a monetary value which have a long term function and can be used repeatedly

Front 3

Define capital expenditure

Back 3

It is the finance spend on purchasing fixed assets

Front 4

Define revenue expenditure

Back 4

Payments for the daily running of a business

Front 5

Define retained profits

Back 5

The value of profits that the business keeps after paying taxes to the government and dividends to its shareholders

Front 6

List some internal sources of finance.

Back 6

1. Personal funds
2. Family and friends
3. Retained profits
4. Selling of assets
5. Investing extra cash

Front 7

List some external sources of finance.

Back 7

1. Share capital
2. Preference shares
3. Ordinary shares
4. Loan capital
5. Overdrafts
6. Trade credit
7. Credit cards
8. Government grants
9. Debt factoring
10. Leasing
11. Hire purchase
12. Debentures
13. Venture capital

Front 8

Define share capital

Back 8

Money raised from selling shares in the company

Front 9

Define preference shareholders.

Back 9

Shareholders who earn a fixed dividend from a company's profits and are paid before other shareholders

Front 10

Define ordinary shares (equity capital).

Back 10

The dividends of these shares are unknown beforehand because it is based on the level of profit made by the company

Front 11

Define loan capital.

Back 11

Medium to long term sources of finance obtained from commercial lenders such as banks.

Front 12

Define mortgage.

Back 12

A secured loan for the purchase of property such as land or buildings.

Front 13

Define overdrafts.

Back 13

A facility that allows a business to temporarily overdraw on its account

Front 14

Define trade credit

Back 14

A source of finance that allows a business to buy now and pay later.

Front 15

Define creditors

Back 15

Organizations that offer trade credit

Front 16

Define credit cards

Back 16

Similar to trade credits but the debtors are financial institutions and not suppliers

Front 17

Define debt factoring

Back 17

A financial service that allows a business to raise funds based on the value owed by its debtors.

Front 18

Define leasing

Back 18

A form of hiring whereby a contract is agreed between a leasing company and the customer

Front 19

Define hire purchase.

Back 19

HP allows a business to pay its creditors in installments. The asset is legally the property of the HP firm until all payments have been made.

Front 20

Define debentures

Back 20

Long term loans with the promise of fixed annual interest payments to the debenture holders and are repayable on maturity.

Front 21

Define venture capital

Back 21

High risk capital in the form of loans or shares, invested by venture capital firms. Venture capitalists seek to invest in small to medium sized businesses that have high growth potential.