Business growth (paper 2) Flashcards
What is internal/ organic growth?
- a business grows itself in a natural way
Methods of organic/ internal growth
- new products
- new markets
- new technology
What is external/ inorganic growth?
Business grows by joining forces with another business
Methods of external growth/ explained?
MERGER- 2 business voluntairly join together
TAKEOVER- one buys the other out
Advantages of organic/internal growth
- relatively low risk
- build some businesses own strength 
Advantages of external growth
- can be achieved quick
- expertise of both businesses can be shared
- has access to customers of both businesses
What is a public limited company?
Conserva shares on the stock exchange, meaning access to large capital, support and growth
Disadvantages of being a PLC
- expensive to set up with a minimum of £50,000 needed
- complex accounting and reporting required
- greater public scrutiny as financial documents are public
- risk of potential takeovers
Advantages of being a plc
+better access to raise additional finances through capital
+ shareholders have limited liability
+ may be able to negotiate better prices with suppliers
Sources of finance for INTERNAL business growth
> selling assets
>retained profits
What are retained profits?
no risk or debt as profits are being invested back into the business
What is selling assets?
a business may have to sell assets that it no longer needs or excess stock. quick way of raising capital but business loses benefit of owning those assets
Sources of finance for EXTERNAL business growth
> loan capital
>share capital
What is a loan capital?
a long term bank loan can be secured againts the businesss assets, but interest will be charged and the business will have to make fixed repayments to repay the debt
What is share capital?
selling the businesses shares on the stock market to raise capital, but puts risk of plc being taken over and all shareholders are also entitled to a share of the dividens
