the need for business finance

Question 1

why is business finance required?

Answer 1

for different purposes at every stage of an enterprise’s activities - from start-up to expansion

Question 2

start-up enterprise: purpose of finance
what may the owner required to set up the enterprise? (5)

Answer 2

to obtain equipment, hire workers, rent or buy premises and purchase inventory
(stock)

Question 3

established enterprise: purpose of finance
what could they require as an enterprise would be generating some profits?

Answer 3

finance to ensure it is able to pay its
phort-term liabilities and stay solvent

Question 4

expanding enterprise: purpose of finance
why will a well established enterprise have plans to grow for? (5)

Answer 4

for example,
to produce products
sell more products
introduce new products
enter a new market
or open a new branch

Question 5

expanding enterprise: purpose of finance
why will an expanding enterprise require finance?

Answer 5

to support its expansion plans, for example to obtain new machinery or premises

Question 6

Key questions an enterprise needs to ask when it is considering whether to obtain business finance:

what are the ‘what’s?

Answer 6

1. what will it be used for?
2. what are the risks involved?
3. what are the benefits for the enterprise?
4. what will be the impact of loan repayments on cash flow?

Question 7

Key questions an enterprise needs to ask when it is considering whether to obtain business finance

what is the ‘where’?

Answer 7

where can it be obtained?

Question 8

Key questions an enterprise needs to ask when it is considering whether to obtain business finance

what are the ‘how’s’?

Answer 8

1. How many additional sales will need to be generated to cover the loan repayments?
2. How much will borrowing the money cost?
3. How long is the repayment period of a business loan?

Question 9

Key questions an enterprise needs to ask when it is considering whether to obtain business finance

what will the be required?

Answer 9

will additional investors be required?

Question 10

Key questions an enterprise needs to ask when it is considering whether to obtain business finance

what can the enterprise use?

Answer 10

Can the enterprise use any of its profits to re-invest into the enterprise?