775512
Description
Mind Map by chloepayne, updated more than 1 year ago
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Created by chloepayne
almost 11 years ago
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Sources of Finance
- internal sources of finance
- retained profit
- profit that has been
retained and re-used.
Cheap and flexible.
- profit that has been
retained and re-used.
Cheap and flexible.
- Sale of assests
- selling fixed assets. Can allow a business to develop more profitable
ventures. Short term can help a firm to avoid crisis. Long term can lower
profitability.
- selling fixed assets. Can allow a business to develop more profitable
ventures. Short term can help a firm to avoid crisis. Long term can lower
profitability.
- Sale and leaseback
- organisation recieves a cash payment. This improves cashflow in
short term. It must then pay rent for leasing the asset that it
previously owned. Long term lower profitability.
- organisation recieves a cash payment. This improves cashflow in
short term. It must then pay rent for leasing the asset that it
previously owned. Long term lower profitability.
- Depreciation
- retained profit
- External sources of finance
- Long term
- share capital
- can raise money
issuing shares.
buying shares
makes you a part
owner of a limited
company.
- shareholders receive a dividend
(share of a profit) for each share they
possess.
- shareholders receive a dividend
(share of a profit) for each share they
possess.
- can raise money
issuing shares.
buying shares
makes you a part
owner of a limited
company.
- preference shares
- dividend received each year is a fixed percentage. Subject to
profit. this is paid before any dividends are paid to the
ordinary shareholders. little risk. they appeal to people
wanting a safe investment. tax changes have made them less
attractive than debentures.
- dividend received each year is a fixed percentage. Subject to
profit. this is paid before any dividends are paid to the
ordinary shareholders. little risk. they appeal to people
wanting a safe investment. tax changes have made them less
attractive than debentures.
- ordinary shares
- no guaranteed percentage.
profitable years = high dividend.
unsuccessful year may mean
no dividend paid to ordinary
shareholders.
- no guaranteed percentage.
profitable years = high dividend.
unsuccessful year may mean
no dividend paid to ordinary
shareholders.
- debentures
- fixed percentage rate of interest. Long term
loan to the business. now more commonly
issued short term due to the pace of change
and higher interest rates.
- fixed percentage rate of interest. Long term
loan to the business. now more commonly
issued short term due to the pace of change
and higher interest rates.
- mortgages
- used to purchase
property. repayable
for up to 25 years.
flexible interest or
fixed rates.
- used to purchase
property. repayable
for up to 25 years.
flexible interest or
fixed rates.
- long-term loans
- provided by specialist
organisations. commercial banks
prefer to provide short term and
medium term.
- provided by specialist
organisations. commercial banks
prefer to provide short term and
medium term.
- goverement assistance
- selective and tends to be in
the form of grants. may be
provided to organisations
operating in areas of high
unemployement. and in
some new businesses.
- selective and tends to be in
the form of grants. may be
provided to organisations
operating in areas of high
unemployement. and in
some new businesses.
- loan capital
- providers of this are
known as creditors. they
charge interest on the loan.
Must be paid before any
dividends are received by
shareholders.
- providers of this are
known as creditors. they
charge interest on the loan.
Must be paid before any
dividends are received by
shareholders.
- share capital
- medium term
- bank loans
- provided for a specific purpose. businesses
need to provide a form of security to the
bank. the loan is repaid with interest over an
agreed period of time.
- provided for a specific purpose. businesses
need to provide a form of security to the
bank. the loan is repaid with interest over an
agreed period of time.
- leasing
- allows a business to to lease(rent) instead of purchase an asset. The
business does not own it therefore doesn't have to pay for repairs or
maintenance.
- allows a business to to lease(rent) instead of purchase an asset. The
business does not own it therefore doesn't have to pay for repairs or
maintenance.
- hire purchase
- involves regular payments for assets that don't become the
purchasers property until the final instalment is made. Finance
houses providing hire purchase charge higher rates to those who
are ignored by banks.
- involves regular payments for assets that don't become the
purchasers property until the final instalment is made. Finance
houses providing hire purchase charge higher rates to those who
are ignored by banks.
- bank loans
- short term
- bank overdrafts
- when a bank allows a firm to overspend it current account to a limited amount for a certain amount of time. widely used and flexible. can
allow a business to overcome a cashflow problems when sales are seasonal or when materials need to be bought in advance. variable
interest rates.
- when a bank allows a firm to overspend it current account to a limited amount for a certain amount of time. widely used and flexible. can
allow a business to overcome a cashflow problems when sales are seasonal or when materials need to be bought in advance. variable
interest rates.
- trade credit
- common form of finance.
suppliers allow a time period
(normally 30 days)
- common form of finance.
suppliers allow a time period
(normally 30 days)
- debt factoring
- allows a business to receive immediate payment for its credit sales. a factoring company provides a cash payment
to a company of up to 80% of the value of the debtors. the factoring company collects the debt and makes a further
payment - will retain approximately 5% for its services.
- allows a business to receive immediate payment for its credit sales. a factoring company provides a cash payment
to a company of up to 80% of the value of the debtors. the factoring company collects the debt and makes a further
payment - will retain approximately 5% for its services.
- bank overdrafts
- Long term
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