Business Finance - Sources
Overview
Every business needs money, whether it is a sole trader launching a food stall or a multinational building a new factory. Where that money comes from, how much it costs, and how quickly it must be repaid shape the decisions a business can make and the risks it takes on.
In this lesson you will explore why businesses need finance at different stages, distinguish internal sources such as retained profit from external sources such as bank loans and share capital, and learn how to recommend the right source for a given situation. These skills appear in almost every Paper 1 case study, so mastering them early gives you a real advantage.
Objectives
- Understand the need for finance: short-term needs, long-term needs, to start up or expand
- Understand internal sources of finance: personal savings, retained profit, selling assets
- Understand external sources of finance: overdraft and trade payables, loan capital, share capital including stock market flotation (public limited companies), venture capital, crowdfunding
Mind map
This topic is mapped out so you can see how the ideas connect.
Open the mind map in the app
Flashcards
Quick recall practice on the facts this topic is tested on.
Practise these cards in the app
Lesson Note
Complete Note Available on the Green Bridge App
Get the Green Bridge CBT app on your phone or computer for the complete IGCSE library: past papers, mark schemes, mind maps, flashcards and audio lessons.
Lesson Evaluation
Congratulations on completing the lesson on Business Finance - Sources. Now that you've explored the key concepts and ideas, it's time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Which of the following is an internal source of finance? A) Bank loan B) Retained profit C) Venture capital D) Crowdfunding Answer: B
- A bank overdraft is most suitable for: A) Buying a new factory B) Covering a short-term cash-flow gap C) Starting a new business D) Paying shareholders dividends Answer: B
- Which source of finance involves selling part-ownership of a company? A) Bank loan B) Trade credit C) Share capital D) Hire purchase Answer: C
- What is a disadvantage of using venture capital? A) It must be repaid within 30 days B) The entrepreneur gives up some control C) It can only be used by sole traders D) It carries the highest interest rate Answer: B
- Which type of business can raise finance through a stock market flotation? A) Sole trader B) Partnership C) Private limited company D) Public limited company Answer: D
Work through these questions in the app
Work through these questions in the app
Recommended Books
Further learning from open sources
-
Textbook section
Obtaining Short-Term Financing
What are the main sources and costs of unsecured and secured short-term financing?
"Introduction to Business: Obtaining Short-Term Financing" by OpenStax, OpenStax, Rice University, licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Source: https://openstax.org/books/introduction-business/pages/16-3-obtaining-short-term-financing. Access for free at https://openstax.org/books/introduction-business/pages/1-introduction
-
Textbook section
Securities Markets
How do securities markets help firms raise funding, and what securities trade in the capital markets?
"Introduction to Business: Securities Markets" by OpenStax, OpenStax, Rice University, licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Source: https://openstax.org/books/introduction-business/pages/16-6-securities-markets. Access for free at https://openstax.org/books/introduction-business/pages/1-introduction
Published by other organisations under open licences, credited as they ask. Links open their websites.
Practice Mock Questions
Want to practice mock questions on Business Finance - Sources? Download the Green Bridge CBT app to access mock questions and full practice assessments for this topic.
Download The App On Google Playstore
Everything you need to excel in your exams
