16 terms

A/AS Level Business Studies - Chapter 26 - Business Finance

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Start-up capital
capital needed by an entrepreneur to set up a business
Working capital
the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers
Capital expenditure
involves the purchase of assets that are expected to last for more than one year, such as building and machinery
Revenue expenditure
is spending on all costs and assets other than fixed assets and includes wages and salaries and materials bought for stock
Liquidity
the ability of a firm to be able to pay its short-term debts
Liquidation
when a firm ceases trading and its assets are sold for cash to pay suppliers and other creditors
Overdraft
bank agrees to a business borrowing up to an agreed limit as and when required
Factoring
selling of claims over debtors to a debt factor in exchange for immediate liquidity - only a proportion of the value of the debts will be received as cash
Leasing
obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. This avoids the needs for the business to raise long-term capital to buy the asset
Hire purchase
an asset is sold to a company that agrees to pay fixed repayments over an agreed time period
Long-term loans
loans that do not have to repaid for at least one year
Equity finance
permanent finance raised by companies through the sale of shares
Long-term bonds or debentures
bonds issued by companies to raise debt finance, often with a fixed rate of interest
Rights issue
existing shareholders are given the right to buy additional shares at a discounted price
Venture capital
risk capital invested in business start-ups or expanding small businesses that have good profit potential but do not find it easy to gain finance from other sources
Business plan
a detailed document giving evidence about a new or existing business, and that aims to convince external lenders and investors to extend finance to the business
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