topic 2.3.1

Question 1

What is a business plan?

Answer 1

a written document for the development of a business outlining a companys strategy

Question 2

What is the relevance of a business plan?

Answer 2

helps secure investments

Provide strategy for the development of the business

helps entrepreneurs identify risks and plan for challanges

helps manage cash flow and financial forecasting

Question 3

What are examples of internal finance?

Answer 3

owners captial

retained profit

sale of assets

Question 4

What do each of the internal finances mean?

Answer 4

1. Owners’ capital ; money provided by owners in a business
2. Retained profit ; profit after tax that is put back into business and not returned
   to the owners
3. Sale of assets ; An established business may be able to sell some unwanted assets to
   raise finance. e. g. machines, stocks, land and buildings that are no longer required could
   be sold off for cash.

Question 5

What are examples of external finance?

Answer 5

family and friends

bank loans

crowd funding

overdrafts

trade credit

Question 6

What do each of the external finances mean?

Answer 6

family and friends - Private loans or investments from relatives

bank loans - Borrowed money repaid with interest

crowd funding - Raising money from a large number of small investors

overdrafts - Short-term borrowing from a bank

trade credit - Buying goods/services on credit from suppliers

Question 7

What are the different forms of business and their meaning?

Answer 7

sole trader - one person business

Partnership - two or more people run a business together

private limited company - a company owned by shareholders

Question 8

what is public limited company?

Answer 8

Shares are traded on the stock market

Question 9

What is unlimited liability?

Answer 9

A business owner is personally responsible for all debts. If the business cannot pay its debts

Question 10

What is limited liability?

Answer 10

a business owner’s personal assets are protected if the business fails

Question 11

what are the contents of a business plan?

Answer 11

the market
financial forecast
business objectives
business oppertunities
costing and finance

Question 12

what are the advantages and disadvanatges of internal finance?

Answer 12

Advantages of Internal finance
1. Business can get fund immediately
2. It is a cheap source of fund

Disadvantages of Internal finance
1. Internal finance can be limited.
2. There is opportunity cost of using internal finance