THEME 2 : Raising Finance

Libby Rose
Flashcards by Libby Rose, updated more than 1 year ago
Libby Rose
Created by Libby Rose over 4 years ago


EDEXCEL defintions

Resource summary

Question Answer
Internal Finance Funds used within the business to fund expansion or growth eg. retained profits and sale of assets.
Owner's capital When an entrepreneur invests their own money into a business eg. personal savings
Retained Profit Profit kept within the business from profit after tax to help finance future activity
Sales of assets A method of raising short term finance by disposing of business assets in return for cash.
External Finance The ability to raise funds from sources outside of the business: - Bank loans and overdrafts - Venture Capital - Crowd funding - Share capital - Business Angels
Peer-to-peer funding The practise of an individual lending to other individuals (peers) with whom there is no relationship or contact.
Business Angels Wealthy individuals making personal investments into start-up businesses in return for a share of the business ie. percentage equity
Crowd Funding This is when the business venture is funded by raising small amounts of money from lots of people eg. through the internet
Loans When a lender provides capital (moeny) to a borrower and the borrower agrees to repay the borrowed money, with interest, over a period of time.
Share Capital Money raised from the sale of shares which is used to fund the future activities of a business.
Venture Capital Investment from an established business person or business into a new business in return for a percentage equity in the new business
Overdrafts The pre-agreed facility to overspend on a current account, up to an agreed sum
Leasing A contract that allows the renting of assets from another party e.g. lease premises, equipment, land etc
Grants Fixed amounts of capital provided to a business by the government or other organisations to fund specific projects
Trade credit An arrangement by a business to provide goods and services on account eg. 30 days
Liability The extent to which an investor is legally responsible for the debts of a business Liability can be: - Limited - Unlimited
Shareholders Investors who are part owners of a company and receive a dividend, which is a share of the profit, in return for their investment
Dividends A percentage of profit paid to shareholders as a reward for their investment
Business Plan A document that describes how an entrepreneur proposes to set up a new business (finance, marketing, HR and operations) in order to receive external finance
Cash-flow Forecast The movement of cash in and out of business over a period of time.
Business Plan A document that allows a business to plan for the future, allocate resources, identify key decisions and prepare for problems and opportunities.
Creditors Those owed money by a business eg. suppliers
Bankrupt When an individual is unable to meet personal liabilities, some or all of which can be a consequence of business activities.
Cash Flow Forecasting The process of estimating the expected cash inflows and cash outflows over a period of time.
Cash Flow Forecast A forward looking statement that tries to predict cash inflows and outflows in the future.
Cash Flow Statement A backward looking statement that shows what happened to cash inflows and outflows.
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