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long term bank loan
fixed rates provide more certainty but can become expensive (require security or collateral for loan)
investment
purchase of fixed assets, causes cash flow of business to initially be negative
revenue expenditure
spending on all costs and assets, other than fixed assets (physical or tangible items that a company owns and uses in its business operations to provide services and goods to its consumers), includes wages and salaries
capital expenditure
purchase of assets that are expected to last for more than one year such as buildings or machinery
working capital
capital needed to pay raw materials
- current assets - current liabilities
internal sources of finance
raised from business's own assets or from profits left in business
external sources of finance
raised from sources outside the business usually with the help of a provider
bank overdrafts
bank allows business to overdraw on its account by writing cheques to a greater balance in the account. overdrawn amount always agreed on in advance, has a limit beyond which the firm can go. high interest. if bank becomes concerned about stability of customers, can "Call" in overfraft and force business to pay it back
trade credit
delaying the payment of bills for goods and services received without receiving immediate payment
leasing
obtaining of vehicles or equipment and paying a rental charge over a fixed period of time, avoids the need for business to raise long-term capital, periodic payments, risk of having unreliable or outdated equipment is reduced as leasing company will repair and update
medium term bank loans
up to periods of 5 years with fixed interest
crowdfunding
use of small sums of capital from many individuals to finanace a new business venture
debentures
bonds issued by companies to raise debt finance, often with a fixed rate of interest (up to 25 years)
venture capital
for small companies not listed on stock exchange to gain long term investment funds
microfinance providers
provision of small loans by specialist finance businesses
business angels
individual usually with business experience who directly invests part of their wealth into a new and growing business, some loss of ownership
fixed costs
remain fixed no matter the level of sales or output (might change in long term but not short term)
variable costs
costs that vary with output (if nothing is produced or sold, variable cost = 0)
direct costs
costs that can be identified with each unit of production, evidently and explicitly associated with output or sale of a certain good (short term may be variable or fixed)
indirect costs
costs which cannot be identified with a unit of production and cannot be traced back or allocated to a cost centre
revenue
value of sales made during trading period (selling price x quantity sold)
debtors
customers who have bought products on credit and will pay cash in the future
current liabilities
debts of the business that will usually have to be paid within a year
current assets
value of all assets that could reasonably be expected to be converted to cash within a year
goodwill
arises when a business is valued or sold for more than the balance sheet value of its assets
working capital cycle
refers to duration between organisation paying for production costs of a goods or service and it receiving the cash from customers