The planning and monitoring of a business's financial resources to achieve financial goals.

Internal Sources of Finance

Money that comes from within a business. Examples include capital from personal savings, retained profits, and selling assets.

External Sources of Finance

Money that comes from outside a business. Examples include bank loans, overdrafts, venture capital, new partners, trade credit, leasing, and government grants.

Money invested by the owner, which may include personal savings.

Reinvesting the profits made from the business back into the business.

Selling products owned by the business, such as machinery, equipment, or excess stock.

Money borrowed that is paid off with interest over a period of time.

A facility allowing a business to use more money than they have in their bank account.

Investment by individuals or groups in exchange for a share of the profits and a return on their investment.

A new person who buys into the business.

An arrangement to pay suppliers at a later date, usually after the stock has been sold.

Renting an asset instead of buying it.

Fixed amounts of money awarded by the government that usually do not have to be paid back.

Borrowed money that is paid back with interest within an agreed time frame, including bank loans, overdrafts, mortgages, credit cards, and equipment leasing/hire purchase.

Raising capital through the sale of shares, including self-funding, investments from family or friends, private investors, stock market, and government.

The ratio of a company's debt-to-equity. High gearing means more debt than equity, while low gearing means more equity than debt.

Indicates that a business has a higher proportion of debt relative to equity, which can be considered higher risk.

Indicates that a business has a lower proportion of debt relative to equity, considered more financially stable but not all debt is bad debt.

Advantages of Equity Finance

No repayment period, safer, better in weak external conditions

Disadvantages of Equity Finance

Dilution of control, time spent providing information to investors, takes longer to organise

Advantages of Debt Finance

Loans can be organised quite quickly, allows the spending of funds that has not been earned just yet

Disadvantages of Debt Finance

Being put into debt with interest rates, can lead to financial instability if the repayments are not made

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Financial Mgt Part 1

Study stack cards on Financial Management Part 1

Term	Definition
Financial Management	The planning and monitoring of a business's financial resources to achieve financial goals.
Internal Sources of Finance	Money that comes from within a business. Examples include capital from personal savings, retained profits, and selling assets.
External Sources of Finance	Money that comes from outside a business. Examples include bank loans, overdrafts, venture capital, new partners, trade credit, leasing, and government grants.
Capital	Money invested by the owner, which may include personal savings.
Retained Profits	Reinvesting the profits made from the business back into the business.
Selling Assets	Selling products owned by the business, such as machinery, equipment, or excess stock.
Bank Loan	Money borrowed that is paid off with interest over a period of time.
Overdraft	A facility allowing a business to use more money than they have in their bank account.
Venture Capital	Investment by individuals or groups in exchange for a share of the profits and a return on their investment.
New Partner	A new person who buys into the business.
Trade Credit	An arrangement to pay suppliers at a later date, usually after the stock has been sold.
Leasing	Renting an asset instead of buying it.
Government Grants	Fixed amounts of money awarded by the government that usually do not have to be paid back.
Debt Finance	Borrowed money that is paid back with interest within an agreed time frame, including bank loans, overdrafts, mortgages, credit cards, and equipment leasing/hire purchase.
Equity Finance	Raising capital through the sale of shares, including self-funding, investments from family or friends, private investors, stock market, and government.
Gearing	The ratio of a company's debt-to-equity. High gearing means more debt than equity, while low gearing means more equity than debt.
High Gearing	Indicates that a business has a higher proportion of debt relative to equity, which can be considered higher risk.
Low Gearing	Indicates that a business has a lower proportion of debt relative to equity, considered more financially stable but not all debt is bad debt.
Advantages of Equity Finance	No repayment period, safer, better in weak external conditions
Disadvantages of Equity Finance	Dilution of control, time spent providing information to investors, takes longer to organise
Advantages of Debt Finance	Loans can be organised quite quickly, allows the spending of funds that has not been earned just yet
Disadvantages of Debt Finance	Being put into debt with interest rates, can lead to financial instability if the repayments are not made

Created by: Jonathan Odorcic

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