Unit 3.3 EFFECTIVE FINANCIAL MANAGEMENT

Question 1

Name an internal source of finance.

Answer 1

Selling assets

Question 2

Give one advantage of using retained profit as a way of financing business growth?

Answer 2

CHEAPER
No interest has to be paid
EASIER 
No LOANS have to be applied for 
BUsiness 
NOT in DEBT

Question 3

3 marks.. outline one method that a business may use to increase its profit..

Answer 3

Reduce the number of STAFF
which will lower its COSTS
If revenue stays the same, profit should rise

(other examples, adding value, price change, improve customer service)

Question 4

3 marks ..Explain one disadvantage to the business of BORROWING money from a BANK

Answer 4

PAY INTEREST
EFFECT depends upon how MUCH MONEY IS BORROWED and how HIGH/LOW INTEREST RATES are
if A LOT OF MONEY IS BORROWED and HIGH interest rate.. more pay back=more costs
LESS PROFIT