Business Financing Concepts

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Seed money

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Seed money is the initial capital used to start a business, often coming from the founders' personal assets or friends and family.

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Long-term assets

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Long-term assets are assets that a company intends to hold for more than one year, such as property, plant, and equipment.

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Long-term liabilities

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Long-term liabilities are financial obligations that are due in more than one year, such as bonds payable and long-term loans.

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Cost vs. revenue

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Cost refers to the expenses incurred in the production of goods or services, while revenue is the income generated from selling those goods or services.

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Pro forma

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Pro forma refers to financial statements based on hypothetical scenarios or projections, often used for planning and decision-making.

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Criteria for determining an entrepreneur’s creditworthiness

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Creditworthiness is determined by factors such as credit history, income, debt levels, and financial stability.

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Impact of creditworthiness on obtaining a business loan

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A higher creditworthiness increases the likelihood of obtaining a business loan with favorable terms, while lower creditworthiness may result in higher interest rates or loan denial.

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Standard H: Business Financing

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Standard H focuses on understanding business financing concepts, including assets, liabilities, and creditworthiness.

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Objectives of Standard H

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The objectives include defining key financial terms and understanding the criteria for creditworthiness in business financing.

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Importance of understanding fixed and variable assets for entrepreneurs

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Understanding the difference helps in effective financial planning and management, ensuring that resources are allocated efficiently and risks are minimized.