What is owners capital
The money provided by the owners in a business
What is retained profit
Profit after tax that is put back into the business abs not returned to the owners
Give 2 examples of what assets a business could use for sales of assets
.machinery
.obsolete stock
Name 6 examples of external finance
.family and friends
.banks
.peer-to-peer funding
.business angels
.credit
.grants
What are business angels
Individuals who typically may invest between £10000 and £100000 often in exchange for stake in a business
What is crowd funding
When individuals can lend money to others without pervious knowledge of them
Name 8 methods of finance
.loans
.share capital
.venture capital
.overdrafts
.leasing
.trade credit
.grants
What is an implication of unlimited liability
Business owners with unlimited liability are exposed financially to the failure of their business
What is an implication of limited liability
The owners of a business with limited liability are shareholders
Name 3 factors to asses which finance is appropriate for limited and unlimited liability
.weather short term or long term finance is needed
.the financial position of the business
.cost
How to add value
Earnings enhanced
financial risk reduced
efficiencies result
Equity
Common stock + retained earnings
Retained earnings
Net income - dividends
Plug feature
If liabilities and owners equity exceed projected assets fills gap
What is plug considered if liabilities + owners equity > assets
Excess cash
What is plug considered if liabilities + owners equity < assets
Note payable
Dividend yield
Dividend / stock price
If EPS increases, dividend will
Increase
Stock price change if company increases debt / equity ratio
Decrease
If debt increases, the financial leverage
Increases
Financial risk if debt changes to lower interest rate
Reduced
Stock market depressed, interest rates low, growth prospects excellent. How to get financing?
Long term debt
Does stock appreciation offset dividend reduction
Yes
As leverage increases the EPS?
Increases
