Sources of Finance

Good Essays
Source of finance
Match the source with advantages and disadvantages
State if advantage/disadvnatage ordinary share capital: money given to a company by shareholders in return for a share certificate, which gives them part ownership of the company and entitles them to a share of the profits
21.Increasing ordinary share capital can make it easier to borrow more funds from a bank as the share capital can purchase assets that can be used as collateral. advantage 22.Bringing new shareholders into a small business often means that further expertise is brought into the business. advantage 3.Ordinary share capital is permanent — the business does not need to pay it back advantage 17.As the business grows, the percentage shareholding of the original owner(s) will probably decline. This can ultimately lead to a smaller share of the profit and even a loss of control of the business. disadvantage 28.They are generally cheaper than other sources advantage 20.In profitable years, ordinary shareholders will expect high dividends. disadvantage 12.The original aims of the business may be lost due to having too many shareholders disadvantage 8.It is not necessary to pay shareholders a dividend if the business cannot afford it advantage venture capital: finance that is provided to small or medium-sized firms that seek growth, but which may be considered risky by typical share buyers or other lenders.
.

2. It is possible that venture capitalists will exert too much influence, so the original owner may lose his/her independence. disadvantage 10.Venture capitalists will sometimes allow interest or dividends to be delayed advantage 19.In return for the high risks, venture capitalists will often want high interest payments or dividends.
Disadvantage

7.Venture capitalists will often want a significant share of the business. disadvantage 1.It is useful for high-risk firms that are unable to get finance. advantage 14.Venture

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