2019 paper 2

Question 1

what is capital

Answer 1

the money and assets a business uses to fund its growth and operations

Question 2

what is capital productivity

Answer 2

it is how efficiently a business uses its physical capital to produce its products and services

Question 3

how do you calculate the labor productivity

Answer 3

value of goods and services/total hours worked

Question 4

what does cost of sales mean

Answer 4

the cost of producing a product or service or delivering it to its customers

Question 5

what are interests

Answer 5

the cost of borrowing or lending money

Question 6

what are sources of finance

Answer 6

where a business gets money from to fund its operations and growth

Question 7

what are the 2 types of sources of finance

Answer 7

external and internal

Question 8

what are external sources of finance

Answer 8

money that is taken from outside a business

Question 9

what are some examples of external sources of finance (5)

Answer 9

1.loans
2.venture capitals
3.crowdfundung
4. debentures
5. overdrafts

Question 10

what are 2 advantages of loans

Answer 10

• getting loans allow a business to quickly access money
• loans help the business maintain ownership as they don’t have to give up a part of their company to take a loan

Question 11

what are 2 disadvantages of loans

Answer 11

• the money must be paid back within a certain time period with an interest which can drain money

-if not paid within the given time period a business may fall into debt, leading to more financial problems

Question 11

what are capital ventures

Answer 11

they are funds (money) provided by investors specially to start up and new businesses

Question 12

what are 2 advantages of venture capitals

Answer 12

• money is provided to the business to grow and reach their potential
• investors carry knowledge and expertise that can help a business grow efficiently

Question 13

what are 2 disadvantages of venture capitals

Answer 13

• when getting funded by investors a business may have to give up a part of the decision-making power and ownership
• venture capitalists put strict rules on how the money can be spent which doesn’t allow the business to use it to try new things if the market changes.

Question 14

what is crowdfunding

Answer 14

it is when a crowd of people contribute small amounts of money each for a business to raise funds

Question 15

what are 2 advantages of crowdfunding

Answer 15

• allows a business to raise funds without a need of a loan or to attract big investors
• if many people contribute it tells a business that there is support and a liking for their idea before its launched

Question 16

what are 2 disadvantages of crowdfunding

Answer 16

• a lot of crowdfunding projects don’t get enough money to meet the amount of money they need so they may not be able to launch the product or service
• to promote and advertise the crowdfunding campaign requires a lot of time and money input

Question 17

what are debentures

Answer 17

• its a type of loan a business takes from investors where they pay and interest for the money lent and then after a set period the business will pay the investors back the original money borrowed

Question 18

what are 2 advantages of debentures

Answer 18

• debentures have a long repayment period which allows a business make use of the money for the long time before paying it back
• the business maintains its control over the business because they don’t have to give up any ownership and can make its own decisions

Question 19

what are the 2 disadvantages of debentures

Answer 19

• companies have to pay the fixed interests regularly even though they aren’t making any profit
• owners will have to prioritize paying the debenture back with the interest

Question 20

what are overdrafts

Answer 20

• it is when a business draws more money from the bank than they actually have and are used for short term needs and have to be payed back with an interest

Question 21

what are 2 advantages of overdrafts

Answer 21

• a business can quickly get a lot of money when in an urgent need
• getting an overdraft is better than getting a loan because it requires less paperwork and is simpler than getting a loan

Question 22

what are 2 disadvantages of overdrafts

Answer 22

• they have high interest rates
• businesses can rely too much on overdrafts and can face financial issues if the money cant be payed back

Question 23

what is the statement of comprehensive income

Answer 23

• its the financial report to show how much a business has made over a certain time period

Question 24

how is the statement of comprehensive income useful to a business (3)

Answer 24

- it shows profit gain or loss to help a business see the area where profit is lost or gained - it helps a business see how much money it spends and earns over a time period to help a business make decisions on how to allocate the money and maximize profit - it allows investors to see how financially stable a business is and creates an oppurtunity for investment

Question 25

what are some advantages of using external sources of finance (3)

Answer 25

- a business can obtain any amount of money it needs than it can take from its own - investors that lend a business money can offer valuable advice and help in decision making - a business will have less risk as the money is not their own and is from investors of banks

Question 26

what are 3 disadvantages of using an external source of finance

Answer 26

- high interest rates - can lead to debt and financial problems - can lose ownership in order to obtain the money and will have less impact on decision making

Question 27

what are the 3 types of internal sources of finance

Answer 27

1. personal profit 2. selling assets 3. retained profit

Question 28

what are the benefits of using personal profits as an internal source of finance

Answer 28

- no interest - no need to payback - time and money saving as no need to launch campaigns like in crowdfunding

Question 29

what are the benefits of selling assets as a source of internal finance

Answer 29

- no debt - quickly gain cash - selling things that a business no longer needs can help save moeny

Question 30

what is retained profit

Answer 30

it is the money a business saves or keeps after distributing profits and paying its bills

Question 31

what are the 3 disadvantages of using internal sources of finance for a business

Answer 31

- limited amount of money can be taken - if the business uses its own money, its can miss opportunities to invest or grow -can leave a business with less money that may have to be used for emergencies

Question 32

what are the 2 types of promotion

Answer 32

- above the line and below the line

Question 33

what is above the line promotion

Answer 33

- it is a type of promotion that targets a large audience

Question 34

give 4 examples of above the line promotion

Answer 34

- tv advertisements - radio advertising - print advertising - outdoor advertising

Question 35

what is below the line promotion

Answer 35

- promotion that is targeted to specific groups of people

Question 36

give 4 examples of below the line promotion

Answer 36

- direct mail - email advertising - In-store promotions and discounts - giving out samples

Question 37

what are the 2 disadvantages of below the line promotion

Answer 37

- limited reach - personalized communication can be more expensive

Question 38

what are 2 disadvantages of above the line promotion

Answer 38

- may not directly reach the target audience - high cost