EDEXCEL Business A Level Paper 2 (Theme 2 & 3) Study Questions and Answers

Retained profits profits that the owners have reinvested into the business after paying costs and taxes Owners' funds money put in by the owners themselves Sale of assets a one-off way to raise money, generally used during financial struggles Benefits of owners funds Avoids interest on loans Owners keep complete control Disadvantages of owners funds If it fails after remortgaging, they could lose their house Limit to amount raised Short term finance examples overdrafts for daily expenses Medium term finance examples loans, hire purchase, trade credit, debt factoring used to pay for repairs, paid back after 1-5 years Long term finance examples issuing shares, debentures, mortgages, grants used to pay for major expenditure, paid back over many years Selling assets Can sell machines, buildings, land Limited buyers Advertising costs Sold cheaply Loans High interest rates Usually requires security in the form of assets which will be taken away if they don't make the repayments Needs regular updates Grants No repayment May be recalled if conditions aren't met May not cover full amount