The Need for Business Finance
What term is used for the money needed for day-to-day operations of a business?
What is working capital?
What is the formula for calculating working capital?
What is current assets minus current liabilities?
This source of finance is obtained from within the business and includes retained profits
What are internal sources of finance?
his factor relates to the cost of obtaining funds, often determined by interest rates.
What is the cost of finance?
The statement that estimates the cash inflows and outflows of a business over a future period is called what?
What is a cash flow forecast?
This is often the primary reason why a start-up company seeks finance.
What is to cover the initial set-up costs?
These assets are expected to be converted to cash, sold, or consumed within a year or less.
What are current assets?
Long-term loans provided by financial institutions which are typically secured against assets.
What are bank loans or mortgages?
The amount of risk involved in using the finance, affecting both the lender's and the borrower's decision.
What is financial risk?
One way to improve cash flow is to increase the speed of this from customers.
What is collection of receivables or debtors?
Name the type of finance needed to pay for the long-term growth of a business.
What is development or growth capital?
Name the two main components of working capital
What are inventories (stock) and receivables (debtors)?
These funds are raised by issuing shares to the public in a stock market.
What is equity finance?
How easily a business can obtain finance depending on its size, credit history, and relationship with the lender.
What is accessibility or availability of finance?
This involves delaying outflows by taking longer to pay suppliers without damaging relationships.
What is extending trade payables?
This is a period when a business may seek additional finance to manage a gap between cash outflows and inflows.
What is a cash flow crisis or shortfall?
This is the effect of a company having too little working capital.
What is not being able to meet short-term liabilities?
This is a short-term source of finance used to cover up cash shortfalls, often with high-interest rates.
What is an overdraft?
The requirement for finance over a short, medium, or long term influences the choice of this.
What is the duration or term of finance?
Name the method of improving cash flow that involves managing inventory levels more efficiently.
What is inventory management?
Businesses often need finance to take advantage of these, which can help them to grow rapidly if exploited properly.
What are market opportunities?
Free points
YAY
Name the long-term finance obtained by selling debt to investors, which must be repaid at a future date.
What are bonds or debentures?
A factor that determines whether the finance is for a specific asset, where the asset can be used as security.
What is the purpose of finance?
The process of forecasting cash inflows and outflows to ensure a company can meet its short-term obligations is known as what?
What is cash flow management?