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Edexcel GCSE Business Studies
1.3 Putting a Business Idea into Practice
1.3.4 Sources of business finance
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Profits that a business keeps rather than distributes to shareholders are called
retained
Match the external source of finance with its description:
Loans ↔️ Borrowing money with interest
Equity ↔️ Selling shares for capital
Grants ↔️ Funds for specific purposes
Crowdfunding ↔️ Raising money from many people
Equity finance involves selling shares in exchange for
capital
, which means investors buy a piece of the company.
True
What is one advantage of using retained profits as a source of finance?
No interest payments
Borrowing money from banks, lenders, or the government is called a
loan
What is one disadvantage of equity finance for a business?
Investors share profits
Equity finance allows a business to obtain funding without repaying capital with
interest
What is a disadvantage of debt finance related to repayments?
Regular loan repayments
Angel investors typically invest their personal funds in exchange for
ownership shares
.
True
Internal sources of finance include retained profits, sale of assets, and owner
investment
What does equity as an external source of finance involve?
Selling shares in the business
What is the key aspect of equity finance?
Investors buy a piece of the company
What is a key disadvantage of equity finance compared to debt finance?
Partial loss of control
What is a key disadvantage of debt finance?
Regular repayments
Arrange the advantages of vouchers in order of significance:
1️⃣ Upfront funding
2️⃣ Attract new customers
3️⃣ No interest payments
What is the primary focus of venture capital firms?
High-growth potential businesses
What do internal sources of finance refer to?
Funds within business operations
What is the term for selling fixed assets to raise finance?
Sale of assets
Steps to consider when choosing external sources of finance
1️⃣ Identify financial needs
2️⃣ Research available options
3️⃣ Evaluate advantages and disadvantages
4️⃣ Select the most suitable source
Profits that a business keeps in the business rather than distributes to shareholders are called
retained
Internal sources of finance provide businesses with more
independence
and control over their funding.
True
Equity finance involves selling
shares
in the business to investors in exchange for funding.
True
What is the key aspect of equity finance?
Investors buy a piece of the company
Match the advantage of debt finance with its description:
No loss of control ↔️ Owner retains full control as no shares are sold
Tax deductible ↔️ Interest payments reduce taxable profits
What is a key advantage of using vouchers for finance?
Upfront funding without repayment
How do angel investors differ from traditional lenders like banks?
More personal and collaborative
Match the external source of finance with its description:
Loans ↔️ Borrowing money from lenders
Grants ↔️ Funds provided by governments
Crowdfunding ↔️ Raising money from many people
Compared to internal sources of finance, external sources provide larger amounts of
capital
Equity finance investors share profits via
dividends
Match the advantage of debt finance with its description:
No loss of control ↔️ Business owner retains full control
Tax deductible ↔️ Interest payments reduce taxable profits
Vouchers involve interest payments like loans.
False
One key disadvantage of angel investors is the dilution of
equity
Internal sources of finance allow a business to fund operations without external lenders, giving more control and independence.
True
Funds provided by the government or other organizations for specific purposes are called
grants
What is a disadvantage of equity finance?
Partial loss of control
What is the primary purpose of a grant as a source of finance?
Specific research or development
Equity finance allows a business to obtain funding without repaying the capital with
interest
Equity finance results in no loss of control over the company.
False
Vouchers are a form of external finance where a business receives funding in exchange for providing customers with
vouchers
Match the advantage of angel investors with its description:
Access to capital ↔️ Provides significant cash for growth
Mentorship and guidance ↔️ Offers business knowledge and advice
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