When a family-owned bakery, North Mill Bakes, applies for a bank loan to open a second shop, the bank examines its business plan. The plan forecasts sales o...
Question 1 Report
When a family-owned bakery, North Mill Bakes, applies for a bank loan to open a second shop, the bank examines its business plan. The plan forecasts sales of 2,400 loaves each week and gives details of ingredient costs, pricing and expected profit. The bank is an important external stakeholder in this decision.
(a) What is meant by an external stakeholder? [2]
(b) Identify one item of information, other than forecast sales, that the bank may use before lending. [1]
(c) Explain one reason why the bank wants this information. [2]
Answer Details
(a) An external stakeholder is a person or group outside the business that has an interest in, or is affected by, its activities. The bank is external because it does not work within North Mill Bakes but is affected by whether the loan is repaid. [2]
(b) The bank could use a cash-flow forecast before lending. A profit forecast, existing debts, collateral, owner investment or costs would also be valid. [1]
(c) This information helps the bank assess whether North Mill Bakes is likely to have enough money to make loan repayments. It reduces the risk that the bank lends money which is not repaid. [2]
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