Topic 2.1.1 Business growth Flashcards
What are the internal sources of finance for growth?
Retained profit,selling assets
Disadvantage of using retained profit for growh.
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.
Disadvantage of selling assets for growth?
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.
Advantages of selling assets.
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.
What are the external sources of finance for growth?
Loan capital,share capital,Stock market flotation-converting to plc’s,Crowdfunding
Disadvantage of loan capital for growth?
Interest has to be paid on the loan.Therefore,the fixed costs of the business will increase.As a result,profit may fall.