Business Studies - sources of finance advantages and disadvantages

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  • Created by: susiegray
  • Created on: 16-12-14 10:01
Retained profit
Ad- you don't have to pay interest or dividends on the money. You don't have to find banks, shareholders, etc to lend money to the business. Dis- Costs the business money that it could need later. YOu have to be making profit in the first place.
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Asset sales
Ad- you can get money fast. Large business with a lot of spare land or vahicles can make a lot of money. Dis- Costs the business materials or machinery they could need if they want to expand. You can only sell it once - it is not an ongoing source.
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Share capital
Ad- the stock market is an organised marketplace. You can make millions fast. Anyone can buy stocks. Dis- You can lose some control over the business. There are a lot of legal requirements.
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Overdraft
Ad- money is only borrowed when it is needed, which cuts down on interest. Fast way of getting money. Dis- expensive for small businesses. Banks may issue higher charges for cheques issued when the account is overdrawn. Few thousand maximum.
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Bank loan
Ad- interest is fixed, so the costs of the loan stay the same each month. Can be a long term source of finance. Dis- the bank may demand security on the loan, so the business will have to pledge assets. Interest is payed.
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Bonds
Potentially millions of pounds can be raised, so is a long term source of finance. Dis- Interest needs to be payed. On very large bonds this can be millions.
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Trade credit
Ad- you can have access to thousands without being charged for 1-3 months. Dis- some businesses give discounts when their customers pay immdediately. The business can get into debt easily.
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Other cards in this set

Card 2

Front

Asset sales

Back

Ad- you can get money fast. Large business with a lot of spare land or vahicles can make a lot of money. Dis- Costs the business materials or machinery they could need if they want to expand. You can only sell it once - it is not an ongoing source.

Card 3

Front

Share capital

Back

Preview of the front of card 3

Card 4

Front

Overdraft

Back

Preview of the front of card 4

Card 5

Front

Bank loan

Back

Preview of the front of card 5
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