Trade Credit and Sources of Finance

They pay less interest, hence less risk.

The finance source should match the finance need.

It increases the perceived risk, making it harder to secure further financing.

<p>It is liquid, meaning it can be immediately available to spend.</p> Signup and view all the answers

<p>To estimate future cash inflows and outflows.</p> Signup and view all the answers

<p>Trade Credit.</p> Signup and view all the answers

<p>Internal sources are obtained by the business itself, while external sources are obtained from outside the business.</p> Signup and view all the answers

<p>Microfinance provides smaller loans to poorer people to start their own businesses, and it differs from traditional finance in that it targets smaller, low-income entrepreneurs.</p> Signup and view all the answers

<p>Short-term sources are repaid within a year, while long-term sources are repaid over a longer period. Examples of short-term sources include overdrafts and hire purchase, while long-term sources include issuing shares and owner's savings.</p> Signup and view all the answers

<p>Retained profits are a part of shareholders' equity, and they increase the capital employed by a business.</p> Signup and view all the answers

<p>Current liabilities are repaid within a year, while non-current liabilities are repaid over a longer period. Current liabilities reduce working capital, while non-current liabilities do not.</p> Signup and view all the answers

<p>Working Capital = Current Assets - Current Liabilities. It represents the amount of money available to finance a company's day-to-day operations.</p> Signup and view all the answers

<p>Current Liabilities are debts owed by a business for less than 1 year, whereas Non-Current Liabilities are debts owed by a business for more than 1 year.</p> Signup and view all the answers

<p>Shareholders' Equity = Total Assets - Total Liabilities. It represents the total amount of money invested in a business by the shareholders/owners.</p> Signup and view all the answers

<p>Capital Employed is the long-term capital invested in a business, and it is calculated as Capital Employed = Non-Current Assets + Total Equity.</p> Signup and view all the answers

<p>Total Equity represents the amount of money invested in a business by the shareholders/owners, whereas Non-Current Liabilities represent the long-term debts owed by a business.</p> Signup and view all the answers

<p>A business can use its balance sheet to calculate ratios such as Working Capital and Capital Employed, and to analyze its liquidity and profitability.</p> Signup and view all the answers