Edexcel A Level Business Studies - Theme 2 Revision Questions and Answers

Internal finance Money generated by the business or its current owners External finance Money raised from sources outside the business Owner's Capital The money provided by the owners in a business Sale of assets when a business sells off its unwanted or unused assets to raise funds Retained profit Profit after tax that is 'ploughed back' into the business Bank overdraft An agreement between a business and a bank that means a business can spend more money that it has in its account (going 'overdrawn'). The overdraft limit is agreed and interest is only charged when the business goes overdrawn trade credit the practice of buying goods and services now and paying for them later Grants A sum of money given by a certain organisation, usually the government, for a certain reason or cause Crowdfunding Where a large number of individuals invest in a business or project on the internet, avoiding the use of a bank Lease A contract to acquire the use of resources such as property or equipment bank loan A fixed amount loan from a bank which is generally used to finance long-term assets and is paid back in smaller monthly installments Share capital Money introduced into the business through the sale of shares Venture capitalism Providers of funds for small or medium-sized companies that may be considered too risky for other investors Collateral An asset that might be sold to pay a lender when a loan cannot be repaid Limited liability A legal status that means shareholders can only lose the original amount they invested in a business