1.3.4 Sources of business finance

    Cards (47)

    • Profits that a business keeps rather than distributes to shareholders are called retained
    • Match the external source of finance with its description:
      Loans ↔️ Borrowing money with interest
      Equity ↔️ Selling shares for capital
      Grants ↔️ Funds for specific purposes
      Crowdfunding ↔️ Raising money from many people
    • Equity finance involves selling shares in exchange for capital, which means investors buy a piece of the company.

      True
    • What is one advantage of using retained profits as a source of finance?
      No interest payments
    • Borrowing money from banks, lenders, or the government is called a loan
    • What is one disadvantage of equity finance for a business?
      Investors share profits
    • Equity finance allows a business to obtain funding without repaying capital with interest
    • What is a disadvantage of debt finance related to repayments?
      Regular loan repayments
    • Angel investors typically invest their personal funds in exchange for ownership shares.

      True
    • Internal sources of finance include retained profits, sale of assets, and owner investment
    • What does equity as an external source of finance involve?
      Selling shares in the business
    • What is the key aspect of equity finance?
      Investors buy a piece of the company
    • What is a key disadvantage of equity finance compared to debt finance?
      Partial loss of control
    • What is a key disadvantage of debt finance?
      Regular repayments
    • Arrange the advantages of vouchers in order of significance:
      1️⃣ Upfront funding
      2️⃣ Attract new customers
      3️⃣ No interest payments
    • What is the primary focus of venture capital firms?
      High-growth potential businesses
    • What do internal sources of finance refer to?
      Funds within business operations
    • What is the term for selling fixed assets to raise finance?
      Sale of assets
    • Steps to consider when choosing external sources of finance
      1️⃣ Identify financial needs
      2️⃣ Research available options
      3️⃣ Evaluate advantages and disadvantages
      4️⃣ Select the most suitable source
    • Profits that a business keeps in the business rather than distributes to shareholders are called retained
    • Internal sources of finance provide businesses with more independence and control over their funding.

      True
    • Equity finance involves selling shares in the business to investors in exchange for funding.

      True
    • What is the key aspect of equity finance?
      Investors buy a piece of the company
    • Match the advantage of debt finance with its description:
      No loss of control ↔️ Owner retains full control as no shares are sold
      Tax deductible ↔️ Interest payments reduce taxable profits
    • What is a key advantage of using vouchers for finance?
      Upfront funding without repayment
    • How do angel investors differ from traditional lenders like banks?
      More personal and collaborative
    • Match the external source of finance with its description:
      Loans ↔️ Borrowing money from lenders
      Grants ↔️ Funds provided by governments
      Crowdfunding ↔️ Raising money from many people
    • Compared to internal sources of finance, external sources provide larger amounts of capital
    • Equity finance investors share profits via dividends
    • Match the advantage of debt finance with its description:
      No loss of control ↔️ Business owner retains full control
      Tax deductible ↔️ Interest payments reduce taxable profits
    • Vouchers involve interest payments like loans.
      False
    • One key disadvantage of angel investors is the dilution of equity
    • Internal sources of finance allow a business to fund operations without external lenders, giving more control and independence.
      True
    • Funds provided by the government or other organizations for specific purposes are called grants
    • What is a disadvantage of equity finance?
      Partial loss of control
    • What is the primary purpose of a grant as a source of finance?
      Specific research or development
    • Equity finance allows a business to obtain funding without repaying the capital with interest
    • Equity finance results in no loss of control over the company.
      False
    • Vouchers are a form of external finance where a business receives funding in exchange for providing customers with vouchers
    • Match the advantage of angel investors with its description:
      Access to capital ↔️ Provides significant cash for growth
      Mentorship and guidance ↔️ Offers business knowledge and advice