unit 1 LO7

Question 1

are owners savings short term or long term

Answer 1

short or long term

Question 2

are reserves short term or long term

Answer 2

long term

Question 3

is trade credit short term or long term

Answer 3

short term

Question 4

is hire purchase short term or long term

Answer 4

short term

Question 5

is a credit card short term or long term

Answer 5

short term

Question 6

is and overdraft short term or long term

Answer 6

short term

Question 7

is a loan long term or short term

Answer 7

long term

Question 8

is a mortgage short term or long term

Answer 8

long term

Question 9

is venture capitalist long term or short term

Answer 9

long term

Question 10

is share issue long term or short term

Answer 10

long term

Question 11

is crowdfunding short term or long term

Answer 11

long term

Question 12

advantages of owners savings

Answer 12

• no need to repay the money
• low cost, no interest to be payed

Question 13

disadvantages of owners savings

Answer 13

• may leave the owners with insufficient funds for personal use
• may not be available

Question 14

advantages of reserves

Answer 14

• no need to repay the money
• low cost, no interest

Question 15

disadvantages of reserves

Answer 15

-not available to a new business in their first year of trading
- not available if the business has made a loss

Question 16

advantages of trade credit

Answer 16

• improves cash flow, buy now pay later
• no interest if payed within the agreed time scale

Question 17

disadvantages of trade credit

Answer 17

• discounts from early payment will be lost
• interest charge if not payed within time scale

Question 18

advantages of hire purchase

Answer 18

• payment is spread over a period of time
• can obtain equipment that would not otherwise be afforded

Question 19

disadvantages of hire purchase

Answer 19

• interest and additional charges make it expensive
• can only be used for equipment/machinary

Question 20

advantages of credit card

Answer 20

• borrowing is free if payed within the time period
• payment protection ( money can be claimed back if there is an issue)

Question 21

disadvantages of credit card

Answer 21

• interest charged if not repaid within the time period
• high interest rates leading to spiraling debt

Question 22

advantages of an overdraft

Answer 22

• can help with cash flow problems
• interest is only charged on the daily amount borrowed

Question 23

disadvantages of an overdraft

Answer 23

• interest rates are usually high
• prolonged use makes it expensive

Question 24

advantages of a loan

Answer 24

• repayments are spread over a period of time
• fixed instalments help with cash flow management

Question 25

disadvantages of a loan

Answer 25

- length and interest rate can make it expensive - lender may require security on the loan ( assets )

Question 26

advantages of a mortgage

Answer 26

-can obtain premise that could not be afforded - repayments are spread over a long period of time

Question 27

disadvantages of a mortgage

Answer 27

- can only be used for property - property will be repossessed if payments are not kept up with

Question 28

advantages of venture capitalist

Answer 28

- finance as well as advice and expertise - business connections to help the businesses growth

Question 29

disadvantages of venture capitalist

Answer 29

- equity funded, the venture capitalist is an owner - reduced control over decisions for current owner

Question 30

advantages of share issue

Answer 30

- no need to repay the money - no interest

Question 31

disadvantages of share issue

Answer 31

- shareholders need to be paid dividends - dilutes control of existing shareholders

Question 32

advantages of crowd funding

Answer 32

- finance and promotion - available to businesses stuggling to secure conventional methods

Question 33

disadvantages of crowdfunding

Answer 33

- cost of providing appropriate reward for investors - business intentions made public so are at risk of being copied if not fully protected