Theme 2

Question 1

Internal Finance

Answer 1

Finance raised within the business

Question 1

External Finance

Answer 1

Money that comes from outside a business.

Question 2

Retained Profit

Answer 2

Profits that are kept for re-investment.

Question 3

Advantages of Retained Profit

Answer 3

No Interest, Flexibile Use.

Question 4

Disadvantages of Retained Profit

Answer 4

Opportunity Cost, May not be enough profit to reinvest.

Question 5

Advantages of Owners Capital

Answer 5

No Interest, Free Source.

Question 6

Disadvantages of Owners Capital

Answer 6

Risk of investment loss, may not have enough saved up.

Question 7

Advantages Of Bank Finance

Answer 7

Large Amounts Obtainable, Trustworthy and Reliable Source.

Question 8

Disadvantages of Bank Finance

Answer 8

Interest, Need to Provide Collateral.

Question 9

P2P Advantages

Answer 9

Interest Rates Often Low, Fast Approval Process.

Question 10

P2P Disadvantages.

Answer 10

Can Be Hard to Obtain.

Question 11

Advantages Of Business Angels

Answer 11

Possible Large Scale Investment, Advice and Possible Knowledge.

Question 12

Disadvantages of Business Angels

Answer 12

Loss Of Control Over Business.

Question 13

Advantages Of Crowd Funding

Answer 13

Can Be Cheap + Easy to Set Up.

Question 14

Disadvantages of Crowd Funding

Answer 14

Not suitable for raising large amounts of money, unreliable.

Question 15

Advantages Of Share Capital

Answer 15

No Interest, Can Raise Large Amounts.

Question 16

Disadvantages Of Share Capital

Answer 16

Dilutes Control, Business Becomes Vulnerable.

Question 17

Venture Capital

Answer 17

Money invested into business by business angels.

Question 18

Advantages Of Venture Capital

Answer 18

Can obtain large amounts of knowledge and experience.

Question 19

Disadvantages of Venture Capital

Answer 19

Loss of control/profits; loss of independence.

Question 20

Advantages of Trade Credit

Answer 20

Keeps money in the business - improves cash flow, possible discounts for early payment.

Question 21

Disadvantages of Trade Credit

Answer 21

Supply chain complications, Risk of late payment.

Question 22

Advantages of Grants

Answer 22

Doesn’t need to be paid back, No loss of control.

Question 23

Disadvantages of Grants

Answer 23

Competitive, hard to obtain, Does not cover the full cost.

Question 24

Business Plan Benefits

Answer 24

Supports Budgeting, Supports Lending, Identify Any Potential Cash Flow Problems.

Question 25

Business Plan Limitations

Answer 25

Inaccuracy; figures can be estimates/forecasts.
Cannot predict external shocks.

Question 26

Uses Of Cash Flow Forecasts

Answer 26

Identifies problems with payments/sales revenue.
Assesses ability to pay suppliers/employees.
Identifies shortfalls in cash.

Question 27

What Does The Business Plan Focus On?

Answer 27

Marketing Plan - Market Research, Market Mapping,
Operational Plan - Production Methods, Materials Needed,
Financial Plan - Finance Needed, Projection of Revenue and Costs.

Question 28

Cash Flow Forecasts Definition

Answer 28

Cash flow forecasts show the expected income and expenditure of the business over the coming year.