Business Studies Collins Revision Guide. - StudyGuide.PK

Check yourself answers8 SOURCES OF FNANCE (PAGE 32)1 When a business is being created. (1)To replace old equipment. (1)When a business needs to cover poor cash flow. (1)For expansion of product range. (1)For expansion in number of premises. (1)2 External. (1) This is money from outside the business.SCORE3 B Profit from previous years kept in the business (1)4 By taking on additional partners. (1)Using the owner’s own savings. (1)They could also use retained profit if there was any.5 There is no interest to pay. (1) Interest is a major cost formany businesses so this is a very valuable source.6 A Trade credit. (1)C Overdraft. (1)7 Any three of the following: Charities, (1) Government, (1) Localcouncil (1) or the EC (1). Grants are a very useful source offinance as no interest is involved.8 Having to share decisions. (1)Share profit. (1)9 By getting a mortgage on the premises. (1)Using retained profit if there is enough. (1)Selling existing premises and leasing them back. (1)There are other sources of finances that such a businesscould use including: debentures, long-term bank loans, hirepurchase or leasing of equipment. In an exam with a casestudy try and use the information that is given to you. Forexample, if it says that the business is profitable then it issensible to suggest retained profit.109TOTAL