Week 25 Revision Deck

• Capital expenditure refers to investment spending on fixed assets, such as the purchase of machinery, equipment, land and buildings.
• Collateral refers to the financial guarantee for securing external loan capital to finance investment expenditure for business growth.
• Fixed assets (or non-current assets) are items of monetary value that have a long-term function for businesses, so can be used repeatedly for the purpose of production.
• Revenue expenditure refers to spending on the day-to-day running of a business, such as payment of rent, wages, salaries and utility bills.\
• Different capital and revenue expenditures

  A) Capital Equipment

  B) Machinery

  C) Property

  D) Intellectual

  E) Energy

  F) Rent

  G) Advertising

  H) Administration

  I) Wages

  
• Business angels are extremely wealthy individuals who risk their own money by investing in small to medium sized businesses that have high growth potential.
• Crowdfunding is the practice of raising finance for a business venture or project by getting small amounts of money from a large number of people, usually through online
• External sources of finance are the funds from outside of the organization, such as through debt (overdrafts and loan capital, share capital and business angels.
• Initial public offering (IPO) refers to a business converting its legal status to a publicly traded company by floating (or selling) its shares on a stock exchange for the first time.
• Internal sources of finance are funds generated from within the organization, namely through personal funds, retained profits and the sale of assets.
• Leasing is a form of hiring whereby a lessee pays rental income to hire assets from the lessor, the legal owner of the assets.
• Loan capital (or debt capital) refers to medium- to long-term sources of interest-bearing finance obtained from commercial lenders. Examples include mortgages, business development loans and debentures.
• Long-term sources of finance are those available for any period of more than 12 months from the accounting period, used for the purchase of fixed assets or to finance the expansion of a business.
• Microfinance is a type of financial service aimed at entrepreneurs of small businesses, especially females and those on low incomes.
• Overdrafts allow a business to spend in excess of the amount in its bank account, up to a pre-determined limit. They are the most flexible form of borrowing for most businesses in the short term.
• Personal funds are a source of internal finance, referring to the use of an entrepreneur's own savings. Personal funds are usually used to finance business start-ups for sole traders.
• Retained profit is the value of the surplus that a business keeps to use within the business after paying corporate taxes on its profits to the government and dividend payments to its shareholders.
• Sale of assets means selling existing items of value that the business owns, such as dormant assets (unused assets) and obsolete assets (outdated assets).
• Share capital is the money raised from selling shares in a limited liability company
• Share issue (or share placement) means an existing publicly held company raises further finance by selling more of its shares.
• Short-term sources of finance are those available for a period of less than one year, used to pay for the daily or routine operations of the business, such as overdrafts and trade credit.
• Sources of finance is the general term used to refer to where or how businesses obtain their funds, such as from personal funds, retained profits, loan capital and share capital.
• A stock exchange is a highly regulated marketplace where individuals and businesses can buy and/or sell shares in publicly traded companies.
• Trade credit allows a business to postpone payments or to 'buy now and pay later. The credit provider does not receive any cash from the buyer until a later date (usually allow between

  30-60 days).