What is capital expenditure?
investments in non-current assets
What is revenue expenditure?
spending on daily business operations
What are non-current assets?
assets that are used for more than 12 months
What are internal sources of finance?
funds that come from within the business
What are the three types of internal sources of finance?
personal funds, retained profit, sale of assets
What are personal funds? Advantages and disadvantages
savings of the owner
A: flexibility in finance
D: reliant on the owner’s personal wealth
What are retained profit? Advantages and disadvantages
profits that are re-invested back into the business
A: control over how funds are used
D: no dividends for shareholders
What are sale of assets? Advantages and disadvantages
selling of non-current assets that the business doesn’t use
A: allows businesses to invest capital into more pressing areas
D: reliant on the business having non-current assets
What are external sources of finance?
funds that come from outside the business
What are the eight types of external sources of finance?
share capital
loan capital
overdraft
trade credit
crowdfunding
leasing
microfinance
business angels
What is share capital? Advantags and disadvantages
finance is raised through the sale of shares (ownership)
A: can raise large amonts of finance
D: dilutes ownership and control
What is loan capital? Advantages and disadvantages
borrowing from financial institutions
A: flexibility over repayment terms
D: likely to lead to large interest costs
What is overdraft? Advantages and disadvantages
withdrawing more than available funds
A: useful in emergencies
D: short-term only, high interest
What is trade credit? Advantages and disadvantages
buy now, pay later (credit card)
A: improves cash flow management
D: bad debts
What is crowdfunding? Advantages and disadvantages
raising small amounts from many individuals online
A: access to wide range of investors
D: dilutes ownership and control
What is leasing? Advantages and disadvantages
renting rather than buying a fixed asset
A: cheap to gain access to the fixed asset in the short term
D: expensive in the long term
What is microfinance? Advantages and disadvantages
small, low-interest loans for businesses
A: great for business who can’t access loans
D: only suitable for low amounts
What is business angel? Advantages and disadvantages
investments from wealthy individuals
A: experise from welathy investor
D: dilutes control and ownership
