4133471
Description
Mind Map by Josh Anderson, updated more than 1 year ago
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Created by Josh Anderson
almost 9 years ago
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Business Studies - AQA - GCSE - Sources of Finance
- Personal Capital
- Own money
- Advantages
- Flexible
- Potential to raise large amounts
- Flexible
- Disadvantages
- Shareholders expect a return
- Shareholders expect a return
- Advantages
- Own money
- Retained profit
- Profit from previous months from business
- Disadvantages
- Could be spent elsewhere
- Profit is lost if business fails
- Could be spent elsewhere
- Advantages
- No interest rates
- No interest rates
- Disadvantages
- Profit from previous months from business
- Loan
- Receiving money to pay back later for an increased price (Due to interest)
- Disadvantages
- High interest rates
- Possible repossession
- High interest rates
- Advantages
- Repayments can be spread out to ease pressure
- Fairly flexible
- Repayments can be spread out to ease pressure
- Disadvantages
- Receiving money to pay back later for an increased price (Due to interest)
- Mortgage
- A company takes the title of the debtor's property in exchange for finance
- Disadvantages
- Company can sell the building to repay the loan
- High interest rates
- Company can sell the building to repay the loan
- Advantages
- Loan
- Loan
- Disadvantages
- A company takes the title of the debtor's property in exchange for finance
- Overdraft
- When the balance in the bank goes beneath zero but the user of the account can carry on spending, as long as they pay it back (with interest) afterwards
- Disadvantages
- High interest rates
- Risk of losing possessions if not repaid
- High interest rates
- Advantages
- No late payment penalties
- Less paperwork
- Flexible (when you need it)
- No late payment penalties
- Disadvantages
- When the balance in the bank goes beneath zero but the user of the account can carry on spending, as long as they pay it back (with interest) afterwards
- Leasing
- "Renting" the assets that are needed, small regular payments rather than one lump sum, never actually owning.
- Disadvantages
- Cannot sell the asset
- Do not own it
- Cannot sell the asset
- Advantages
- Repairs done by leasing company
- Usually up to date equipment
- Repairs done by leasing company
- Disadvantages
- "Renting" the assets that are needed, small regular payments rather than one lump sum, never actually owning.
- Factoring
- Selling accounts to a third-party funding source to raise capital
- Disadvantages
- Reduces allowances for other borrowing
- Restrict funding
- Reduces allowances for other borrowing
- Advantages
- Prices usually low
- Smoothens cashflow
- Immediate
- Prices usually low
- Disadvantages
- Selling accounts to a third-party funding source to raise capital
- Hire purchase
- Buying whilst using it, paying is smaller regular payments rather than one lump sum
- Buying whilst using it, paying is smaller regular payments rather than one lump sum
- Venture capital
- Investors money (for a percentage of the business)
- Investors money (for a percentage of the business)
- Share issues
- Selling shares to new shareholders
- Selling shares to new shareholders
- Grant
- Government funding
- Advantages
- Don't have to pay back
- Don't have to pay back
- Disadvantages
- Feel like a slave to the government
- Feel like a slave to the government
- Advantages
- Government funding
- Gifts
- From friends and family
- From friends and family
- Sale of assets
- Selling belongings (business/personal)
- Selling belongings (business/personal)
- Trade credit
- Use it now, buy it later
- Advantages
- No cash necessary immediately
- Induces more sales over time
- No cash necessary immediately
- Disadvantages
- High costs afterwards
- Chance of debt
- High costs afterwards
- Advantages
- Use it now, buy it later
- Credit Card
- Set balance on the card each month, anything spent must be paid back
- Set balance on the card each month, anything spent must be paid back
- Debenture
- Long-term loan
- Long-term loan
- Selling stock
- Selling the produce from the business
- Selling the produce from the business
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