Module 5

Question 1

When does the interest change?

Answer 1

Depending on the risks involved

Question 2

What are the forms of borrowing?

Answer 2

1. Bank loans (asks for what)
2. Overdraft (more likely for a band to approve)
3. Specialist banks (loans - venture capital)
4. International bank (large business can borrow, in exchange for a Eurobond)
5. Government (can lend to private sector to safeguard jobs - lower interest to be paid)
6. Hire purchase (paid back over a specific period of time)
7. Leasing (rental, against payment)
8. Trade credit (goods bought - sold - after a period of time)

Question 3

What is a Eurobond?

Answer 3

A promise to pay interest per year

Question 4

What is internal finance?

Answer 4

Using our profits to invest in new areas or to expand

Question 5

What are the advantages of internal finance?

Answer 5

Cheaper
Less paper work
Immediately available
No need for credit borrowing

Question 6

What are the disadvantages of internal finance?

Answer 6

Limited money/funds
May not be a way of getting more money from owner
No tax - deduction

Question 7

What is interest?

Answer 7

The cost of borrowing

Question 8

What is price control?

Answer 8

Government mandated legal min/max prices set for goods/services (specific) to manage affordability on certain goods such as food and energy products

Question 9

What are price ceilings?

Answer 9

Max amount a seller is allowed to charge for a good or service

Question 10

What is a price floor

Answer 10

Minimum amount a seller is allowed to charge for a good or service

Question 11

What are effects of price control

Answer 11

Customers who can purchase good at lower price gain but those who can’t afford it lose

There might be a first come first served basis

Favouritism towards customers - under the counter

Shortages

Black market