Sources of Finance

The Word document has information on sources of finance-stuff that is included are:

hire purchase, overdrafts, leasing, trade credit, bank loans, oppurtunity costs and retained profits.

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  • Created by: Rukhsar
  • Created on: 09-04-10 09:41
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What is Sources of
Finance all about?
`Sources of Finance' is all about
where you get your money from as a
business. It really is that simple!
But as with everything in Business Studies you need to
think about some wider issues to get your answer right:
LET'S LOOK AT EACH OF THESE POINTS.
SO WHY DO FIRMS NEED MONEY?
As a business you will not get very far
without money!

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Page 2

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It is just the same for you.…read more

Page 3

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USE YOUR SAVINGS!
Well you could maybe spend all of the money that you have
saved up to buy the item that you want.…read more

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BANK LOAN
If you cannot afford the item you want with just using your
savings (if you have any), then you might go to your bank
manager and ask them if you can borrow some money and
agree to pay them back later on.
There are benefits and problems of using a loan:
Easy to organise a loan with a bank.
You agree how much you will pay back every
month.
You will have to pay more money back than
you borrowed.…read more

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TRADE CREDIT
Another way of getting that item that you really wanted is
to use something called Trade Credit.…read more

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Bob the Blob's Question Time
WHAT AM I?
I have two words and start with the letter R.
I am interest free and I do not have to be
paid back!
I might not be available to every business.
I am kept back in a business for future use.
I AM R _________________
_______________.
I am one word and start with the letter S.
I am usually needed for a bank loan.
I might be a house, building or car.…read more

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Explain in as much detail as you can which method of finance out
of a bank loan and my own savings (retained profit) I might use to
buy a new car.
Make sure that you have given the advantages and disadvantages of BOTH
a bank loan and using your own savings (Retained Profit). You must reach a
clear conclusion as to which method you would use and why.…read more

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OK....BUT REMEMBER THAT YOU HAVE TO PAY SHAREHOLDERS'
DIVIDENDS EVERY YEAR.....THIS WILL COST YOU MONEY!
SHAREHOLDERS ALSO WANT TO HAVE SOME SAY IN HOW YOU
RUN YOUR BUSINESS.…read more

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Ever wanted more money in your bank account? Well an
overdraft is an agreement between you and your bank that
actually allows you to take out more money than you have
in your current account. GREAT!!!
There is a problem
though......you have to pay back
this money and you are
charged INTEREST EVERY
DAY that you are overdrawn.
You would never use this
source of finance to buy anything too expensive or use it for
a long period of time.....…read more

Page 10

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Well.....actually there are loads of different types of finance
but we will finish this section by looking at two of the major
ones.
LEASING
If you wanted a new car as a
business but did not have the
money to buy one, you might be
able to lease one.
A company might allow you to
use their car in return for you
paying them a monthly fee.…read more

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