Sources of Finance and Business Expenditure

Comprehensive vocabulary flashcards covering internal and external sources of finance, expenditure types, and related business financial terminology from the lecture notes.

Capital expenditure

The amount of money spent on the purchase of non-current (fixed assets) assets.

Non-current assets

The resources owned by a business which are held for a period of more than 1 year to be used in business activity (e.g., buying machinery, buying a delivery van, or purchasing a building).

Revenue expenditure

Spending on the day-to-day running of a business, such as production wages and paying rent.

Working capital

The amount of cash available to run a business on a day-to-day basis, which can be used to fund revenue expenditure.

Retained profit

The final profit kept in the business after tax and any distributions to owners (such as dividends) available for reinvestment; also called plough-back profits.

Sale of unused or idle fixed assets

An internal source of finance where a business sells an asset it no longer needs (such as spare machinery, a vehicle, or unused land) to release cash that has been tied up.

Owner's savings

Personal savings invested into the business by the existing owner; commonly used by sole traders and when starting a small business.

Issue of shares

A method where a limited company raises share capital by issuing new shares to investors, who become part owners.

Bank loan

An agreement where a bank lends an agreed amount for a set period (more than 1 year), and the business repays the principal plus interest under agreed terms.

Collateral security

An asset which can be taken possession of by the bank in case the business fails to repay the loan.

Bank overdraft

An arrangement where the bank allows the business to spend more than its current-account balance, up to an agreed limit.

Selling debentures

A method where a company issues loan certificates to investors promising interest and repayment on an agreed date.

Leasing

An agreement between a lessor and a lessee where the lessor owns the asset and rents it to the lessee, who makes rental payments to use the asset.

Debt factoring

A service where a business assigns or sells unpaid customer invoices to a factor, which advances cash and collects the debts.

Grants

Financial aid awarded by a government or other organization for a specified purpose, subject to eligibility and conditions, and not paid back.

Subsidies

Government support that lowers a business's costs and supports an activity (for example, a payment for each unit produced).

Micro-finance

Small loans and services for entrepreneurs who have limited access to conventional traditional banking.

Crowdfunding

A method where a business raises money from many contributors, usually through an online platform.