topic 3

• • Capital expenditure: Investment spent on fixed assets such as land, buildings, vehicles and machinery.
• • Revenue expenditure: Payment for the daily running of a business such as raw materials, wages, electricity and more.
• Fixed assets (non current assets): items of value that have a long-term function and are used repeatedly for production.
• Sources of finance: various ways a business gets its money to run a business such as from personal funds, bank loans or share capital.
• Internal sources of finance: funds generated from within the organization, namely through personal funds, retained profits, and the sales of assets.
• Personal funds: a source of internal finance that refers to the use of an entrepreneur’s own savings. (in other words, personal savings or money provided by family or friends.)

  They are used to finance business start ups for sole traders.
• Sale of assets: selling existing items of value that the business owns such as unused assets or outdated assets.(buildings, land, machinery..etc)
• Retained profit: profits that remain within a company after all costs and devidents are paid.
• External sources of finance: Obtaining funds from outside the company to meet its financial needs.
• Share Capital: Funds raised through the sale of shares. Works for limited liability organizations that have shares
• Loan Capital: Company borrowing money from external sources such as banks. Works when a large sum is needed without dilution
• Overdrafts: Taking more money than a business has on its account Works as a solution to minor cash flow
• Trade Credit: A buyer is allowed to delay payment for goods or services received Works for purchasing materials from suppliers that a business has a good relationship with 


  Pros: No payments made at the time of purchase

  Cons: Higher price
• Crowdfunding: Obtaining small amounts of money from a large group of people (usually users of crowdfunding platforms) Works for small businesses with outstanding ideas


  Pros: -Available to everyone

  -Provides acces to a community of donors

  -Free

  -No loss of control

  -Direct feedback

  Cons: -Fees

  -Compliance

  -Competition
• Leasing: Leasing is a financial arrangement where one party (the lessor) allows another party (the lessee) to use an asset Works for businesses that need an asset but cannot afford its purchase


  Pros: -No maintenance

  -Lower tax

  Cons: -No ownership

  -expensive in the long-term
• Microfinance Providers: Microfinance providers offer small-scale financial services, like loans and savings accounts, to support individuals or businesses in underserved communities Works in less developed economies for businesses that are not able to obtain finance from traditional lenders


  Pros: -Easy to obtain

  -Helps to alleviate poverty

  Cons: -High interest rate
• Business Angels: Wealthy individuals investing in high risk business in exchange of ownership Works for businesses with a high growth potential that can appeal to a business angel


  Pros: -Free

  -No interest

  Cons: Loss of control