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Financial Management
Practice
| Term | Definition |
|---|---|
| Internal sources | Sources of finance that come from within the business. Can include owners savings, assets, and retained profits. |
| External Sources | Sources of finance that come from outside of the business. Can include bank loans, new partners, leases, and government grants. |
| Bank Overdraft | A bank overdraft is when a business extends their credit from lending institution beyond 0. This occurs when the account has no or insufficient funds to cover the withdrawal. |
| Factoring | Factoring is a type of debt finance, a business sells their invoices to a third party to meet their immediate cash flow needs. This allows businesses to access capital quickly, while the factor chases up the money for the invoice from the buyer. |
| Creditors | Anyone who the business owes money too. |
| Leasing | It allows a business to use equipment and/or assets without outlaying a large capital investment. There are three types of leases ( Financial, operating, contact hire) |
| Current Assets | can be receivables, inventory and cash, that can change in the short term. |