LO7

Question 1

why business plan

Answer 1

identify and prepare for any issues or problems that may come up. This is useful to both new and existing businesses. Do you imagine Microsoft don’t have a plan for the future? Business plans:
- Prove the idea is viable
- Reduce risks
- Develop business idea
- Raise finance

Question 2

internal sources of finance

Answer 2

Internal Finance: Money which is raised internally, it does not increase the debts of the business.
- Retained profit
- Personal savings
- Sale of unwanted assets
- Sale and leaseback

Question 3

external sources of finance

Answer 3

External finance: Finance provided by people or institutions outside the business, creates a debt that will require payment
- Loans
- Overdraft
- Shares
- Debentures

Question 4

short term sources of finance

Answer 4

Short term: Provides the working capital needed by businesses for day-to-day operations.
- Overdrafts
- Debt factoring
- Trade credit
- Credit cards

Question 5

long term sources of finance

Answer 5

Long term: Finance which is available for more than a year – and sometimes for very many years. Usually this money would be used to purchase long-term fixed assets
- Leasing/Hire purchase
- Mortgage/Bank loan
- Sale of shares
- Sale of assets