3.2 Sources of Finance
Personal funds, sale of assets, and retained profits
What are internal sources of finance
The type of growth that is slow and uses the company's own resources such as retained profit.
What is organic growth
The financial statement that presents the revenues and costs of a business for a period of time.
What is the statement of profit and loss
The difference between sales revenue and cost of sales expressed as a percentage
What is gross profit margin
The type of business that is a non profit, social enterprise, registered as incorporated businesses and t promotes and raises money for good causes.
What is an NGO
The financial service that allows businesses to have access to fixed assets, but without the high costs of the capital expenditure.
What is leasing
The expansion and evolution of a business by using third party resources and organizations rather than relying on internal sources and activities.
What is external growth
The type of asset that lasts for a long time.
What is a Fixed Asset
Current assets - Current Liabilities excluding stocks (inventory)
What is the quick ratio or acid test ratio
If a firm is unable to pay back its debts, the owners of the business can lose everything, including their personal posessions.
What is unlimited liability
The banking service that allows businesses to withdraw more money from their account than exists in the account.
What is an overdraft
The growth method that involves two parties, one providing the rights rights to operate in a certain way and sell the branded or trademarked products.
What is a franchise
Two components of equity
Helps a business determine whether or not the current liabilities can be paid.
What is liquidity
Has exclusive responsibility for the running of a business and is the easiest to set up.
What is a sole trader
Refers to business spending on its everyday and regular operations, e.g. spending on wages, raw materials and bills.
What is a revenue expenditure
When two or more organizations join together to benefit from external growth without having to set up a new separate entity
What is a strategic alliance
What are current liabilities
The financial surplus after all costs
What is profit
Disadvantages of this type of business structure include sharing profits and managing conflict
What is a partnership
A financial service that allows a business customer to purchase and obtain goods and services but to pay for these at a later date.
What is trade credit
The external growth method that involves two or more organizations agreeing to create a new business entity, usually for a finite period of time.
What is a joint venture
The intangible asset that represents the premium price an acquiring company is willing to pay for another company in excess of the fair value of the net assets.
What is goodwill
The value of the funds used to operate the business and to generate a financial return for the organization.
What is capital employed
Refers to the part of the economy run by private individuals and businesses rather than government
What is the private sector.