Matching the Terms and Source of Finance to Business Purpose (HSC SSCE Business Studies): Flashcards
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Practise the cards
10 cards from this deck
Matching finance to business purpose
Matching finance to business purpose
Selecting appropriate source of finance for business activities
Equity capital
Equity capital
Owner's investment in the business
The matching principle in finance
The matching principle in finance
Match loan term with asset's economic lifetime
Short-term (current) assets
Short-term (current) assets
Items used/converted to cash within 12 months
Long-term (non-current) assets
Long-term (non-current) assets
Items used for more than 12 months
Economic lifetime of an asset
Economic lifetime of an asset
Period when asset generates value or is useful to business
Short-term finance for long-term assets causes
Short-term finance for long-term assets causes
Liquidity problems; loan repaid before asset generates cash
Long-term finance for short-term assets causes
Long-term finance for short-term assets causes
Reduced profits; paying after asset sold/situation resolved
Credit rating
Credit rating
Assessment of reliability in meeting financial commitments
Companies vs unincorporated businesses
Companies vs unincorporated businesses
Companies can issue shares/debentures; unincorporated cannot