Finance Sources and Business Control

The video tutorial discusses the financial needs of growing businesses and the various internal and external sources of finance available to them. Internal sources include retained profits, selling assets, and owner's savings, each with its own advantages and limitations. External sources cover loan capital, share capital, and stock market flotation, highlighting their benefits and potential drawbacks. The tutorial provides insights into how businesses can strategically choose the right finance options to support growth and maintain competitiveness.

Why might a growing business need additional finance?

• To close down operations

• To reduce its workforce

• To develop new products and expand

• To decrease its market share

What is a key advantage of using retained profits as a source of finance?

• It incurs high interest rates

• It is quick to access and incurs no fees

• It requires selling company shares

• It involves borrowing from banks

What is a potential disadvantage of selling business assets for finance?

• It provides a cash injection

• It may lead to future operational issues

• It increases the number of shareholders

• It requires paying dividends

What is a benefit of using the owner's savings as a source of finance?

• It is quick and incurs no interest

• It is a slow process

• It incurs interest charges

• It requires selling assets

What is a drawback of using loan capital?

• It requires no collateral

• It is interest-free

• It can be expensive due to interest

• It does not affect cash flow

How does share capital affect business control?

• It has no impact on business control

• It requires repayment with interest

• It dilutes control as new shareholders are added

• It increases control for the original owners

What is a benefit of raising finance through share capital?

• The business must repay the money

• It incurs high interest rates

• The business does not have to repay the money

• It requires selling assets

What is a key advantage of stock market flotation?

• It requires immediate repayment

• It limits the amount of finance raised

• It allows raising large amounts of finance

• It simplifies business operations

What is a potential downside of stock market flotation?

• It requires no legal procedures

• It simplifies business control

• It complicates business control

• It is a straightforward process

What happens to business control when shares are sold to the public?

• Control remains with the original owners

• Control is diluted as anyone can buy shares

• Control is unaffected

• Control is increased for the original owners