CHAPTER 19 – BUSINESS FINANCE Capital Expenditure and Current Expenditure
The financial needs of a business can be divided into capital expenditure and current expenditure.
• Capital expenditure is expenditure that is a one-off or long term for the business (e.g. buying premises or equipment).
• Current expenditure is the everyday or regular expenditure of keeping the business running (e.g. wages and electricity).
Capital expenditure and current expenditure A
Go to page 123 of your Activities and Accounts Book to identify examples of capital expenditure and current expenditure.
SOURCES OF FINANCE
The finance options available to a business can be divided into short term, medium term and long term. Before selecting the most suitable type of a finance, a business should consider the following:
• What is the finance needed for (capital expenditure or current expenditure)? • How quickly is the finance needed? • How long will it need to repay the finance? • What is the cost of the various options? • Will it be able to meet the repayments?
Examples of each type of finance are shown in the following table. Short term
Medium term
• Bank overdraft • Trade creditors • Expenses due
• Term loan • Leasing • Hire purchase
Long term
• Retained earnings • Grants • Ordinary share capital • Long-term loan • Sale and leaseback • Crowdfunding
