1.3.4 Sources of finance

Question 1

Name some short term finances

Answer 1

-overdraft
-Trade credit

Question 2

Name some Long term finances

Answer 2

-Bank loans
-Personal savings
-Venture and share capital
-Crowdfunding
-Retained profit

Question 3

Give a Disadvantage Of a Business Using a Overdraft ( 3 Marker)

Answer 3

Overdrafts can be an expensive source of finance (P) The bank may charge a high rate of interest for the overdraft facility (S) This will lead to an increase in costs for the business (S)

Question 4

Give a Advantage Of a Business Using a Overdraft as Its Sources Of Finance ( 3 Marker)

Answer 4

Overdrafts mean the money is available straight away (P) This will prevent a business from failing to meet its short-term costs (S) Therefore, the business should see a positive closing balance (S)

Question 5

Give a Advantage Of a Business Using Trade Credit as Its Sources Of Finance ( 3 Marker)

Answer 5

Trade credit will allow a small business to buy now and pay later (P) This means the business has a chance to sell the goods before it has to pay its supplier (S) This will improve the cash-flow of the small business (S)

Question 6

Give a Disadvantage Of a Small Business Using Tarde credit as Its Source Of Finance ( 3 Marker)

Answer 6

New start-up businesses are unlikely to secure trade credit (P)This is because they don’t have any evidence that they are able to meet bills when they are due (S)This will reduce the likelihood of a new start-up business securing trade credit (S)