| What will the Role of the Finance Function include? | -Make Financial Accounts that show Profits and Loses [eg]
-Maintain the Financial Record of previous Interactions
-Simply make Payments [Bills, Employees...]
-Analyse the Performance of the Business in a Financial Way
-Suggest Information that can affect Business Planning and Descions, that affects the Finance side |
| Why does a Business need Finance? | -This is simply to Run the Business, and to Fund:
-Expansion, Assets, Efficiency and New Products |
| What are the Factors that Influence the Choice of Finance? | -How much is Needed
-Why that Finance needs to be Taken Place
-Legal Status the Business Obtains
-Current Position the Business is in
-When, and how Long the Finance is Needed for |
| What are Internal Sources of Finance? Give some Examples | -This is getting Funds inside the Business.
-These sources are usually Limited, but this ensures Control of the Business and keeps Interest Rates low
-Owners' Capital, Retained Profit and Selling Unwanted Assets |
| What are External Sources of Finance? Give some Examples | -This is getting Fund outside the Business
-This can be used to get Larger Amounts of Finance, but comes with its owns Risks
-Bank Overdraft, Hire Purchase, Trade Credit, Loans, Mortgage, New Share Issue and Crowdfunding |
| What is Owners Capital, and give Advantages and Disadvantages for it | -This is simply the Entrepreneur's own Savings, that is Invested in the Money, or by giving his own Assets [His Car]
A: Makes a Strong Signal to Banks and other Investors
A: Maximises the Control of the Business
A: Interest Free
D: Amount is Limited as because the Entrepreneur may just not have Enough
D: Very Short Term |
| What is Retained Profits, and give Advantages and Disadvantages for it | -This is simply either Investing the Profits back In, or just Taking it for themselves
A: No Interest needs to be Paid]
A: Owners keep the Control of the Profits and therefore the Business
D: If the Business is Suffering from Temporary Finance Problems, then it'll be Unlikely that there is Profits Retained then
D: The Growth of the Business may Slow Down if its the only Source of Finance
D: Shareholders in the Company may feel Upset that their Dividend Payments aren't Appreciated |
| What is Selling Unwanted Assets, and give Advantages and Disadvantages for it | -This is simply selling Assets that aren't Used, examples can be Land, Buildings, Machinery or Equipment.
A: Business still has Full Ownership, and that no Finance needs to be Repaid
D: Defiantly not a Long Term Finance Source as this is more of a One off Basis
D: Value of the Business will Drop, as they don't owe the Asset anymore
D: Depreciation is more than Likely going to happen to the Asset [Price falls over Time] |
| What is Trade Credit and give Advantages and Disadvantages for it | -Given by a Supplier of the Business, meaning that they can have the Goods now, and Pay Later
A: The Business can then use the Goods in the Manufacturing Process and possibly Sell the Goods before it needs to Pay Back, Improving the Cash Flow
A: Very easy to Maintain
D: If Bills aren't paid on Time then Trust will Crumble and Reputation will Drop
D: Risk for New Businesses as they may just Fail and Shut Down before the Supplier gets Paid, so the Supplier gets Nothing |
| What is a Bank Overdraft and give Advantages and Disadvantages for it | -Short Term Finance Source that has the Business Permission to Withdraw Funds that aren't even There, and is only used to get Temporary Amounts of Money
A: If a Business is Suffering Short Term Shortage of Cash then its a Perfect Solution
A: Interest is only Paid on the Amount Used
A: Flexibility is Given Out
D: The Bank can ask for it Back whenever it Feels Like
D: Bank may Lower, or Withdraw from the Overdraft
D: High Levels of Interest is Attached to this |
| What are Loans and give Advantages and Disadvantages for it | -Family or Friend may Give Money to the Business or the Owner of it
A: Money is Guaranteed for that Set Amount of Time
A: Banks aren't Involved so Control is still Established
A: Interest Rates can be Fixed
A: It can be paid not in One Go, which can Really Help a Struggling Business
D: For a Loan, a Detailed Business Plan is Needed
D: Some Assets may be At Risk of going Away, if a Deal was signed saying if the Business can't Repay
D: Lack of Flexibility - It might not use the Full Loan Amount, but it still needs to pay the Full Amount back Regardless |
| What is Crowdfunding, and give Advantages and Disadvantages for it | -Simply a Way of Raising Money, by getting Attention to your Funding and having Small Investments, which Adds Up
A: Very Cheap Source of Investment
A: Large Internet Grounds, like Social Media, can be used to Attract Large Amounts of Finance, and also Update the Investors of the Progress and Benefits
D: Investors want something to be Offered Back to them, meaning the Control may be Threatened
D: There is a Limit of the Number of Investors, so therefore the Amount
D: The Idea may just Suck and attract No One meaning a Waste of Time |
| What is New Share Issue and give Advantages and Disadvantages for it | -LTD's may sell Shares in the Company // PLC's may give out a New Share that can be Bought for, raising Finance
A: Lots of Money can be Raised
A: Capital isn't a Concern
A: No Interest and Dividends can just be Missed if the Profits are Low
D: Control of the Company may be Threatened if someone has 50% of the Shares
D: Shareholders expect Value for their Investment |
