Topic 2.1.1 Business growth Flashcards

1
Q

What are the internal sources of finance for growth?

A

Retained profit,selling assets

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2
Q

Disadvantage of using retained profit for growh.

A

May take slower for growth.This is because gathering the amount of retained profit needed for significant growth could take a long time.As a result,decreasing productivity/taking longer to reach business success.
Upset shareholders in the short term.This is because shareholders want to maximise their dividends.As a result leading to conflicts between shareholders and the owner leading to shareholders selling their share in the business and leaving,stunting growth.

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3
Q

Disadvantage of selling assets for growth?

A

Selling key/important assets for growth can decrease productivity.For example selling machinery that speeds up the production of the business.As a result,increasing unit costs of the business.

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4
Q

Advantages of selling assets.

A

Business can sell old/used machinery that they don’t need anymore.This means that they could potentially get a return on there investment.As a result,preventing the business from making a loss.

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5
Q

What are the external sources of finance for growth?

A

Loan capital,share capital,Stock market flotation-converting to plc’s,Crowdfunding

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6
Q

Disadvantage of loan capital for growth?

A

Interest has to be paid on the loan.Therefore,the fixed costs of the business will increase.As a result,profit may fall.

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7
Q
A
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