Two Advantages of Retained Profit
1. No interest charges.
2. Only available up to the amount already accumulated by the business to avoid
... [Show More] debts.
Two Disadvantages of Retained Profit
1. Amount available may be limited.
2. Reduces payments to shareholders which may cause dissatisfaction.
Two Advantages of Net Current Assets
1. Encourages the business to manage cash flow effectively.
2. Can fund day-to-day expenditure.
Disadvantage of Net Current Assets
1. Can put pressure on customers as shorter credit terms are offered and this negatively affects relationships with suppliers if longer credit terms are negotiated.
Two Advantages of Sale Of Assets
1. No interest charges
2. Reduces capital tied up in assets, releasing it for other purposes.
Two Disadvantages of Sale Of Assets
1. It is likely that the amount received is not a true reflection of the value of the asset.
2. Can increase costs in the long run if an asset needs to be leased back.
Two Advantages of Owners Capital
1. No interest payments or need to repay.
2. High level of commitment from the owner.
Two Disadvantages of Owners Capital
1. Amount available is likely to be limited.
2. If there is more than one owner this could cause friction if not everyone is able to contribute the same amount.
Two Advantages of Loans
1. Regular pre-agreed repayments make planning and budgeting easy.
2. Ownership or control is not lost.
Two Disadvantages of Loans
1. Interest is charged on the amount borrowed.
2. Interest rates can fluctuate.
Two Advantages of Crowd-Funding
1. Offers the ability to raise finance from a large number of investors.
2. No interest is paid.
Two Disadvantages of Crowd-Funding
1. Partial loss of ownership.
2. No guarantee that the crowd fund will attract sufficient investment to meet the proposal.
Two Advantages of Mortgage
1. Large amounts of finance can be raised and repaid over a prolonged period of time.
2. Ownership or control is not lost.
Two Disadvantages of Mortgage
1. Not suitable for short-term sources of finance.
2. Interest has to be paid regardless of whether or not profit is being made.
Advantage of Venture Capital
1. Finance is provided by a business professional who will often offer advice and mentoring.
Two Disadvantages of Venture Capital
1. Partial loss of ownership and control.
2. Conflict can arise between the entrepreneur and venture capitalist.
Two Advantages of Debt Factoring
1. Speeds up the flow of cash into the business from debts.
2. The factor company takes on the risk of bad debt.
Two Disadvantages of Debt Factoring
1. Only receive a percentage of the amount owed, reducing profits.
2. Can give the wrong impression.
Two Advantages of Hire Purchase
1. Spreads the cost of an asset over its useful life.
2. Avoids the need to pay a lump sum for the use of an asset.
Disadvantage of Hire Purchase
1. Only suitable for low cost assets e.g. Vehicles
Advantage of Leasing
1. Responsibility for maintaining and repairing the asset stays with the supplier
Disadvantage of Leasing
1. You never own the asset, payments are ongoing.
Two Advantages of Trade Credit
1. Delays the need to pay for goods and services purchased, this aids cash flow.
2. No loss of ownership.
Two Disadvantages of Trade Credit
1. Potential loss of discounts offered for cash payments.
2. Only suitable as a short-term sources of finance.
Two Advantages of Grants
1. No need to repay and no interest charges.
2. No loss of ownership or control.
Two Disadvantages of Grants
1. Often require a lengthy application process.
2. Might only be awarded if certain conditions are met.
Two Advantages of Donations
1. No need to repay and no interest charges.
2. No loss of ownership or control.
Two Disadvantages of Donations
1. Likely to be small amounts.
2. Unpredictable
Advantage of Peer-to-Peer Lending
1. Interest rates can be lower than lending from more traditional financial institutions.
Disadvantage of Peer-to-Peer Lending
1. Amounts available may be limited and provided for a short period of time only.
Two Advantages of Invoice Discounting
1. No need to repay.
2. No interest charges.
Disadvantage of Invoice Discounting
1. Often only available if purchases are paid in cash which affects cash flow. [Show Less]