External sources of finance
Is share capital long-term or short-term
long-term
What does business use when it increases stock level or sell goods on credit to customers?
A source of finance
Types of source of finance (based on time)
Short, medium and long-term finance
Two main internal factors to consider when making financial decisions
The size and profitability of the company
What type of capital is business angel?
Venture capital financing
What are the two main sources of external finance
Loan capital and share capital
What is the negative of selling assets?
It can compromise the firm's ability to raise working capital if there are any insufficient resources for production.
Suggest three types of finance for a struggling shoe maker business
Grants
Subsidies
Personal funds
Sales of assets
Bank overdrafts
etc...
It is very risky to borrow long-term finance to pay for ..... needs
Short-term
What is an especially popular way to raise finance in the XXI century?
Crowdfunding
What is the difference between grants and subsidies?
Grants are awarded for a specific purpose or project and can help to finance expenditure entirely.
Subsidies help to partially pat for the cost of something in order to encourage output.
Is it beneficial for business to solely depend on internal sources of finance for expansion? Why?
No. It can slow down business growth, as the development speed will be limited by the annual profits or the value of assets to be sold.
Suggest three appropriate sources of finance for Microsoft if it wants to finance a long-term strategic plan
Share issue
Retained profit
Debentures
Mortgages
What significance do costs have when making financing decisions? (at least one)
Obtaining finance is never free
Loans may become very expensive during times of rising interest rates
Stock market flotation can cost a lot in fees and promotions of the share sale.
Who is Muhammad Yunus?
The founder of the Grameen Bank which makes small loans to poor people with no bank accounts. He won a Nobel peace prize.
Give 1 similarity and 1 difference between mortgages and debentures
Difference:
The main difference between them bonds is collateral. The mortgage bond is collateralized by something that has value (collateral). Debentures have no such collateralization. They are unsecured debt, backed only by the full faith and credit of the issuing company.
Similarity:
Both are a type of loan capital
Explain liquidity
It refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market place or firm's ability to pay short-term debts.
What are the three factors that a business needs to take in consideration when choosing an appropriate source of finance?
purpose and time considerations
the cost to organisation
the issue of the debt versus equity dilemma
Name at least 4 factors that influence the financial choices of a business
Use and time period for which finance is required
Cost
Amount required
Legal structure and desire to retain control
Size of existing borrowing
Flexibility
What is the most profitable company in the world
Saudi Aramco
Explain Debt factoring
A debt factor is a business, such as a bank, that takes over the debtors of a business. Debtors are the customers who have bought on credit. The debt factoring provider takes a commission.
Extra 100 for an explanation to why a business might do this.
Debt factoring gives a business most of the value of debtors to improve its cash flow without having to chase the payment from its customers.
State the three sources of finance in the next 10 seconds starting from NOW!
Personal funds, Retained profits, Sale of assets
What is The debt versus equity dilemma?
The dilemma of when business has to choose whether to issue more shares and lose equity or allow more debt and pay interest
What is gearing?
Gearing refers to the relationship, or ratio, of a company's debt-to-equity
Factors to consider when examining the choice of alternative sources of finance
Size of firm
Purpose of finance
Amount required
Costs
External influences
Duration required