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Finance - Coggle Diagram
Finance
Internal & External Finance
Limited company
Owners debts are limited to the amount that they put into the company
Unlimited company
Owner is responsible for any of the losses that the business makes
Why do businesses need finance?
Business start up costs
Survival (day to day expenses)
Expansion/growth
Expenditure
Capital expenditure
Usiness resources uses repeatedly
Revenue expenditure
Business resources already consumed or will be consumed
Internal finance
Owners capital - savings, loans, selling personal assets etc.
Retained profit
Sale of assets (sale and leaseback)
External finance
Short (12 months), medium (1-3 years), and long-term (3+ years)
Split into sources and methods
Sources - from whom/where the money has come from
Friends & family
Bank
Business angels
Peer to peer
Crowd funding
Method - the way the money is raised.
Sales forecasting
Prediction of future sales revenue using market research or previous sales data
Purpose
Avoid cash flow problems
Frees up management time
Production capacity
Employ more workers
Key factors affecting
Consumer trends
Economic variables
Competitor actions
Limitations
Business is new - start up : difficult to sales forecast
Market subject to significant distrustions from technological change
Demand is highly sensitive to changes in price and income (PED & YED)
Change is fashion and tastes
Changes in market share