2.1.1/2/3 key terms

• Economic variables

  Measures within the economy which have effects on business and consumers e.g. unemployment, inflation and exchange rates
• Internal finance

  The raising of capital/cash from within/inside the business e.g. business/owner’s capital, personal savings, retained profit
• Personal savings/ owners capital

  A source of (internal) finance provided by the owner of a business/personal money from the owner
• Retained profit

  Profit is re-invested back into/kept by the business which is not paid as a dividend. It is an internal source of finance
• Sale of assets

  A type of internal finance, involves selling resources that belong to the business
• Bank loan

  An external method of finance/money borrowed from a bank paid back, with interest (over a period of time)
• Business angels

  Individuals who typically may invest between £10,000 and £100,000 in exchange for a stake in the business
• Crowd funding

  An external source of finance where large numbers of individuals provides funding for a business or project in return for shares/free products/discounts
• Externa finance

  Money raised from outside the business
• Grant

  A sum of money given by a government or other organisation. It does not need to be repaid and no interest is charged
• Leasing

  A contract to acquire the use of resources such as property or equipment
• Loan

  An external source/method; amount of money borrowed, usually repayable after a fixed term of more than 12 months
• Overdraft

  When a business has a negative balance in their bank account because the amount withdrawn is greater than the current balance.
• Peer-to-peer funding

  When a person lends money to other individuals or businesses via online transactions
• Share capital

  The finance raised a business issuing/selling of new shares
• Trade credit

  Where a firm receives stock/inventory/raw materials from a supplier, which it does not have to pay for until later
• Venture capital

  External source of finance when the business issues shares to a small number of investor(s) in return for a capital injection into the company
• Liability

  Responsibility for the financial debts of the business
• Unlimited liability

  A legal status which means that business owners are liable for all business debts
• Limited liability

  The amount of a company’s losses that a shareholder is liable for is limited to the amount they have invested in the company.