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finance (sources of finance (owner capital (savings)
no repay / interest…
finance
sources of finance
owner capital (savings)
- no repay / interest, not affect ownership
- risks savings, not have enough
retained profit (money not for dividends)
- no repay / interest
- not have own profits, not get profit as income
sale of assets (sell items)
- no repay / interest, good if selling old stock / equip
- difficult to sell, take time to sell
overdraft
- meet short term cash flow problems, interest only on amount owed, repayment only when not needed
- interest charged
trade credit (buy goods to sell but not pay straight away)
- goods to sell before paying for them, not interest within agreed time, help with cash flow
- goods need to be paid for even if not sell, interest if late
new partner
- bring new skills, no repayment / interest
- lose some control, sole traders change management
loan
- money immediately available
- interest paid, lender security
share issue (new shares sold)
- investors contribute large amounts, no repay / interest
- give new shareholders a say / share profits, shares only sold by limited companies
crowdfunding (money from public support)
- contribute a lot, no repay / interest
- interest paid if money from loan, ownership shared if money through investor
needed for
start up, expansion, recruitment,
marketing, running business
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role of finance function
calculate profit / loss
forecast cash flow
calculate sales and revenue
ARR
BE
arrange finance
manage payments
revenue = price x quantity sold
increased by increase product price,
reduce price, advertising to increase sales
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TC = FC + total VC
reduced by increase automation,
cheaper suppliers
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