2.1.1

Question 1

what is working capital

Answer 1

the capital of the business used in its day to day operations,calculated as the current asset - current liabilities

Question 2

what is sources of finance

Answer 2

sources of finance are the options available when seeking to raise funds for your future business actions

Question 3

what is internal sources

with examples

Answer 3

sources within a business eg:sale of assets,better working capital,retained profits

Question 4

what is external sources

with examples

Answer 4

sources outside a business eg:friends&family,bank loan,bank overdraft,business angels,loans and grants

Question 5

what is personal sources with examples

Answer 5

when an entrepreneur invests their own money in a business e.g from personal savings

Question 6

what is owner’s capital

3 examples

Answer 6

how much the owner has invested in the business

eg:inheritances,personal credit cards,re-morgaging

Question 7

what is owner’s capital

3 examples

Answer 7

how much the owner has invested in the business

eg:inheritances,personal credit cards,re-morgaging

Question 8

3 advantages of personal sources

Answer 8

• profits stay in business control
• the only option possible
• cheaper than other resorces

Question 9

3 disadvantages of personal sources

Answer 9

• opportunity cost
• lose everything
• cause family tensions

Question 10

what is retained profits

Answer 10

profit kept within a business from profit for future activites

Question 11

advantages of retained profits

Answer 11

• cheap
• very flexible
• management control over investment

Question 12

disadvantages of retained profits

Answer 12

• only option if sufficient retained profits exist with in a business
• cause shareholder dissatisfaction if this expense of dividend payments
• reduces the security blanket of keeping retained profits for unseen situations

Question 13

advantages of sale of assets

Answer 13

• no interest charges
• may be turning an obsolete asset into finance
• immediate lump sum cash injection

Question 14

disadvantages of sale of assets

Answer 14

• only a one off option
• loss of use of the asset and future value
• expensive in the long run