Questions and Answers
Which source of finance involves raising funds from individuals who are willing to invest in the business in exchange for equity?
Business angels
What method of finance involves obtaining funds by allowing another party to use an asset in exchange for periodic payments?
Leasing
Which method of finance involves obtaining funds by selling ownership shares in the business?
Share capital
Which source of finance involves obtaining funds from individuals in exchange for ownership shares in the business?
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What method of finance involves obtaining funds by borrowing from financial institutions and agreeing to repay with interest?
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Which source of finance involves raising funds by allowing individuals to invest in the business in exchange for interest or a share of the profits?
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Which method of finance involves obtaining funds by obtaining short-term borrowing from a bank, up to an agreed limit, and paying interest on the amount borrowed?
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Which source of finance involves raising funds by obtaining money from a large number of individuals, typically via an online platform, in exchange for equity or interest?
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Which method of finance involves obtaining funds by allowing an external party to purchase assets and then leasing them back to the business for an agreed period, in exchange for regular payments?
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Study Notes
Sources of Finance
- Equity Finance: Raising funds from individuals who are willing to invest in the business in exchange for equity.
- Asset-Based Finance: Obtaining funds by allowing another party to use an asset in exchange for periodic payments.
Methods of Finance
- Share Issue: Obtaining funds by selling ownership shares in the business.
- Equity Investment: Obtaining funds from individuals in exchange for ownership shares in the business.
- Debt Finance: Obtaining funds by borrowing from financial institutions and agreeing to repay with interest.
- Investment: Raising funds by allowing individuals to invest in the business in exchange for interest or a share of the profits.
- Overdraft: Obtaining funds by obtaining short-term borrowing from a bank, up to an agreed limit, and paying interest on the amount borrowed.
- Crowdfunding: Raising funds by obtaining money from a large number of individuals, typically via an online platform, in exchange for equity or interest.
- Lease Financing: Obtaining funds by allowing an external party to purchase assets and then leasing them back to the business for an agreed period, in exchange for regular payments.
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