component 1-12. sources of finance

what is capital expenditure

spending on business resources which can be used repeatedly over a period of time eg. fixing assets

what is revenue expenditure

spending on business resources needed in general training of the business eg. raw materials or stock

what is investment capital

investment put into the business

what is retained profit 

retained profit is profit after tax which is kept in the business for reinvestment. It is the most important source of finance for a business 

what is a bank loan

external capital gained from taking taking out a loan from a bank. This will be re-paid with intrest

what is overdraft

able to withdraw more money from the business bank account than the amount in

what is trade credit

when goods are bought from supplier on credit, eg. able to receive the stock/raw materials and pay for them at a later date, often 30 days

what is leasing and hire purchase 

when assets are ‘leased’ from a leasing company. firms get to use the asset whilst monthly repayments are made - but the asset is never owned. Hire purchase is very similar but the assets are owned at the end 

what is a morgage 

large sum borrowed from the bank to purchase buildings. Repaided over many years with added intrest 

what is a venture capitialists

providers of funds for SME that may be consiered too risky for other investors

what is the princes trust/ kings trust

a charitable organisation set up to help young people set up in business 

what is owners capital

the capital put into the business by its owner