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(HL)</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21699/unit-2.html" title="Unit 2">Unit 2</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21753/21-functions-evolution-of-hrm.html" title="2.1 Functions & evolution of HRM">2.1 Functions & evolution of HRM</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25388/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21754/22-organizational-structure.html" title="2.2 Organizational structure">2.2 Organizational structure</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25471/glossary-organizational-structure.html" title="Glossary: Organizational structure">Glossary: Organizational structure</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21755/23-leadership-and-management.html" title="2.3 Leadership and management">2.3 Leadership and management</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24733/glossary-leadership-management.html" title="Glossary: Leadership & Management">Glossary: Leadership & Management</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../24745/24-motivation.html" title="2.4 Motivation">2.4 Motivation</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24719/glossary-motivation.html" title="Glossary: Motivation">Glossary: Motivation</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21757/25-organizational-culture-hl-only.html" title="2.5 Organizational culture (HL only)">2.5 Organizational culture (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25243/glossary-organizational-culture.html" title="Glossary: Organizational culture">Glossary: Organizational culture</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21758/26-industrialemployee-relations-hl-only.html" title="2.6 Industrial/employee relations (HL only)">2.6 Industrial/employee relations (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25125/glossary-industrialemployee-relations.html" title="Glossary: Industrial/employee relations">Glossary: Industrial/employee relations</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21670/unit-3.html" title="Unit 3">Unit 3</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21744/31-sources-of-finance.html" title="3.1 Sources of finance">3.1 Sources of finance</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24501/glossary-sources-of-finance.html" title="Glossary: Sources of finance">Glossary: Sources of finance</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21745/32-costs-and-revenues.html" title="3.2 Costs and revenues">3.2 Costs and revenues</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22092/glossary-costs-revenues.html" title="Glossary: Costs & revenues">Glossary: Costs & revenues</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21746/33-break-even-analysis.html" title="3.3 Break-even analysis">3.3 Break-even analysis</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22270/contribution-analysis.html" title="Contribution analysis">Contribution analysis</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22093/glossary-break-even-analysis.html" title="Glossary: Break-even analysis">Glossary: Break-even analysis</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21747/34-final-accounts.html" title="3.4 Final accounts">3.4 Final accounts</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31367/glossary-final-accounts.html" title="Glossary: Final accounts">Glossary: Final accounts</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21748/35-profitability-and-liquidity-ratio-analysis.html" title="3.5 Profitability and liquidity ratio analysis">3.5 Profitability and liquidity ratio analysis</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25111/glossary-profitability-and-liquidity-ratio-analysis.html" title="Glossary: Profitability and liquidity ratio analysis">Glossary: Profitability and liquidity ratio analysis</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21749/36-efficiency-ratio-analysis-hl-only.html" title="3.6 Efficiency ratio analysis (HL only)">3.6 Efficiency ratio analysis (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25114/glossary-efficiency-ratios.html" title="Glossary: Efficiency ratios">Glossary: Efficiency ratios</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21750/37-cash-flow.html" title="3.7 Cash flow">3.7 Cash flow</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25118/cash-flow-forecasts.html" title="Cash flow forecasts">Cash flow forecasts</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31376/glossary-cash-flow.html" title="Glossary: Cash flow">Glossary: Cash flow</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21751/38-investment-appraisal.html" title="3.8 Investment appraisal">3.8 Investment appraisal</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31377/glossary-investment-appraisal-.html" title="Glossary: Investment appraisal ">Glossary: Investment appraisal </a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21752/39-budgets-hl-only.html" title="3.9 Budgets (HL only)">3.9 Budgets (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../31378/39-budgets-hl-only-glossary.html" title="3.9 Budgets (HL Only) Glossary">3.9 Budgets (HL Only) Glossary</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21684/unit-4.html" title="Unit 4">Unit 4</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21767/41-the-role-of-marketing.html" title="4.1 The role of marketing">4.1 The role of marketing</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25618/glossary-the-role-of-marketing.html" title="Glossary: The role of marketing">Glossary: The role of marketing</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21768/42-marketing-planning.html" title="4.2 Marketing planning">4.2 Marketing planning</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../28328/glossary-marketing-planning.html" title="Glossary: Marketing planning">Glossary: Marketing planning</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21769/43-sales-forecasting-hl-only.html" title="4.3 Sales forecasting (HL only)">4.3 Sales forecasting (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25713/glossary-sales-forecasting.html" title="Glossary: Sales forecasting">Glossary: Sales forecasting</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21713/44-market-research.html" title="4.4 Market research">4.4 Market research</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25208/glossary-market-research.html" title="Glossary: Market research">Glossary: Market research</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21770/45-the-four-ps.html" title="4.5 The four Ps">4.5 The four Ps</a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Product">Product</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../22627/glossary-product.html" title="Glossary: Product">Glossary: Product</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22525/price.html" title="Price">Price</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../22548/glossary-price.html" title="Glossary: Price">Glossary: Price</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22567/promotion.html" title="Promotion">Promotion</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../22704/45-promotion-glossary.html" title="4.5 Promotion - Glossary">4.5 Promotion - Glossary</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22745/place.html" title="Place">Place</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../23813/45-place-glossary.html" title="4.5 Place - Glossary">4.5 Place - Glossary</a></li></ul></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21774/46-the-extended-marketing-mix-7-ps-hl.html" title="4.6 The extended marketing mix (7 Ps) (HL)">4.6 The extended marketing mix (7 Ps) (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../23814/glossary-the-extended-marketing-mix-hl.html" title="Glossary: The extended marketing mix (HL)">Glossary: The extended marketing mix (HL)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21772/47-international-marketing-hl-only.html" title="4.7 International marketing (HL only)">4.7 International marketing (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../23815/glossary-international-marketing-hl.html" title="Glossary: International Marketing (HL)">Glossary: International Marketing (HL)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21773/48-e-commerce.html" title="4.8 E-commerce">4.8 E-commerce</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../23797/glossary-e-commerce.html" title="Glossary: E-commerce">Glossary: E-commerce</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21688/unit-5.html" title="Unit 5">Unit 5</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21937/51-the-role-of-operations-management.html" title="5.1 The role of operations management">5.1 The role of operations management</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24843/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21938/52-production-methods.html" title="5.2 Production methods">5.2 Production methods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24848/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21939/53-lean-production-quality-management-hl.html" title="5.3 Lean production & quality management (HL)">5.3 Lean production & quality management (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24839/glossary-lean-production-and-quality-management.html" title="Glossary: Lean Production and quality management">Glossary: Lean Production and quality management</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21700/54-location.html" title="5.4 Location">5.4 Location</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24959/glossary.html" title="Glossary">Glossary</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21695/55-production-planning-hl.html" title="5.5 Production planning (HL)">5.5 Production planning (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25032/glossary-production-planning.html" title="Glossary: Production planning">Glossary: Production planning</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../33222/56-research-development-hl.html" title="5.6 Research & development (HL)">5.6 Research & development (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../34014/glossary-research-development.html" title="Glossary: Research & Development">Glossary: Research & Development</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21941/57-crisis-management-contingency-planning-hl.html" title="5.7 Crisis management & contingency planning (HL)">5.7 Crisis management & contingency planning (HL)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25042/glossary.html" title="Glossary">Glossary</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../25115/cuegis.html" title="CUEGIS">CUEGIS</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="The 6 CUEGIS concepts">The 6 CUEGIS concepts</a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Ethics">Ethics</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../21954/mcdonalds-supersize-me.html" title="McDonald's - Supersize Me">McDonald's - Supersize Me</a></li></ul></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="The CUEGIS essay">The CUEGIS essay</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22876/planning-your-cuegis-essay.html" title="Planning your CUEGIS essay">Planning your CUEGIS essay</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../33806/paper-2-section-c-questions.html" title="Paper 2 Section C Questions">Paper 2 Section C Questions</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../33959/the-ia.html" title="The IA">The IA</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="HL IA">HL IA</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22190/35-sample-research-questions-for-the-hl-ia.html" title="35 sample research questions for the HL IA">35 sample research questions for the HL IA</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22200/hl-ia-student-checklist.html" title="HL IA - Student Checklist">HL IA - Student Checklist</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../33508/ia-hl-poster.html" title="IA HL Poster">IA HL Poster</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="SL IA">SL IA</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22146/sl-ia-20-sample-titles.html" title="SL IA - 20 Sample Titles">SL IA - 20 Sample Titles</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38181/faq-about-the-sl-ia.html" title="FAQ about the SL IA">FAQ about the SL IA</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../22114/exams.html" title="Exams">Exams</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22115/command-terms.html" title="Command Terms">Command Terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36599/glossary-of-key-terms.html" title="Glossary of key terms">Glossary of key terms</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38059/flashcards-revision.html" title="Flashcards - Revision">Flashcards - Revision</a></li><ul class="level-3 "><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38060/flashcards-revision-unit-1.html" title="Flashcards - Revision (Unit 1)">Flashcards - Revision (Unit 1)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38056/unit-11-revision-flashcards.html" title="Unit 1.1 Revision Flashcards">Unit 1.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38061/unit-12-revision-flashcards.html" title="Unit 1.2 Revision Flashcards">Unit 1.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38067/unit-13-revision-flashcards.html" title="Unit 1.3 Revision Flashcards">Unit 1.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38092/unit-14-revision-flashcards.html" title="Unit 1.4 Revision Flashcards">Unit 1.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38096/unit-15-revision-flashcards.html" title="Unit 1.5 Revision Flashcards">Unit 1.5 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38102/unit-16-revision-flashcards.html" title="Unit 1.6 Revision Flashcards">Unit 1.6 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38103/unit-17-revision-flashcards.html" title="Unit 1.7 Revision Flashcards">Unit 1.7 Revision Flashcards</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38114/flashcards-revision-unit-2.html" title="Flashcards - Revision (Unit 2)">Flashcards - Revision (Unit 2)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38121/unit-21-revision-flashcards.html" title="Unit 2.1 Revision Flashcards">Unit 2.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38125/unit-22-revision-flashcards.html" title="Unit 2.2 Revision Flashcards">Unit 2.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38126/unit-23-revision-flashcards.html" title="Unit 2.3 Revision Flashcards">Unit 2.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38144/unit-24-revision-flashcards.html" title="Unit 2.4 Revision Flashcards">Unit 2.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38146/unit-25-revision-flashcards.html" title="Unit 2.5 Revision Flashcards">Unit 2.5 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38147/unit-26-revision-flashcards-hl-only.html" title="Unit 2.6 Revision Flashcards (HL only)">Unit 2.6 Revision Flashcards (HL only)</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38149/flashcards-revision-unit-3.html" title="Flashcards - Revision (Unit 3)">Flashcards - Revision (Unit 3)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38153/unit-31-revision-flashcards.html" title="Unit 3.1 Revision Flashcards">Unit 3.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38154/unit-32-revision-flashcards.html" title="Unit 3.2 Revision Flashcards">Unit 3.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38182/unit-33-revision-flashcards.html" title="Unit 3.3 Revision Flashcards">Unit 3.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38183/unit-34-revision-flashcards.html" title="Unit 3.4 Revision Flashcards">Unit 3.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38191/unit-35-revision-flashcards.html" title="Unit 3.5 Revision Flashcards">Unit 3.5 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38192/unit-36-revision-flashcards-hl.html" title="Unit 3.6 Revision Flashcards (HL)">Unit 3.6 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38193/unit-37-revision-flashcards.html" title="Unit 3.7 Revision Flashcards">Unit 3.7 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38194/unit-38-revision-flashcards.html" title="Unit 3.8 Revision Flashcards">Unit 3.8 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38195/unit-39-revision-flashcards.html" title="Unit 3.9 Revision Flashcards">Unit 3.9 Revision Flashcards</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38196/flashcards-revision-unit-4.html" title="Flashcards - Revision (Unit 4)">Flashcards - Revision (Unit 4)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38198/unit-41-revision-flashcards.html" title="Unit 4.1 Revision Flashcards">Unit 4.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38203/unit-42-revision-flashcards.html" title="Unit 4.2 Revision Flashcards">Unit 4.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38217/unit-43-revision-flashcards.html" title="Unit 4.3 Revision Flashcards">Unit 4.3 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38218/unit-44-revision-flashcards.html" title="Unit 4.4 Revision Flashcards">Unit 4.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38219/unit-45a-product-revision-flashcards.html" title="Unit 4.5a Product Revision Flashcards">Unit 4.5a Product Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38220/unit-45b-price-revision-flashcards.html" title="Unit 4.5b Price Revision Flashcards">Unit 4.5b Price Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38221/unit-45c-promotion-revision-flashcards.html" title="Unit 4.5c Promotion Revision Flashcards">Unit 4.5c Promotion Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38222/unit-45d-promotion-revision-flashcards.html" title="Unit 4.5d Promotion Revision Flashcards">Unit 4.5d Promotion Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38223/unit-46-revision-flashcards-hl.html" title="Unit 4.6 Revision Flashcards (HL)">Unit 4.6 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38224/unit-47-revision-flashcards-hl.html" title="Unit 4.7 Revision Flashcards (HL)">Unit 4.7 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38225/unit-48-e-commerce-flashcards.html" title="Unit 4.8 E-commerce Flashcards">Unit 4.8 E-commerce Flashcards</a></li></ul><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../38232/flashcards-revision-unit-5.html" title="Flashcards - Revision (Unit 5)">Flashcards - Revision (Unit 5)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38233/unit-51-revision-flashcards.html" title="Unit 5.1 Revision Flashcards">Unit 5.1 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38234/unit-52-revision-flashcards.html" title="Unit 5.2 Revision Flashcards">Unit 5.2 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38235/unit-53-revision-flashcards-hl.html" title="Unit 5.3 Revision Flashcards (HL)">Unit 5.3 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38236/unit-54-revision-flashcards.html" title="Unit 5.4 Revision Flashcards">Unit 5.4 Revision Flashcards</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38237/unit-55-revision-flashcards-hl.html" title="Unit 5.5 Revision Flashcards (HL)">Unit 5.5 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38238/unit-56-revision-flashcards-hl.html" title="Unit 5.6 Revision Flashcards (HL)">Unit 5.6 Revision Flashcards (HL)</a></li><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../38239/unit-57-revision-flashcards-hl.html" title="Unit 5.7 Revision Flashcards (HL)">Unit 5.7 Revision Flashcards (HL)</a></li></ul></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../33830/formulae-quiz.html" title="Formulae Quiz">Formulae Quiz</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Paper 1 Pre-release case study">Paper 1 Pre-release case study</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../44969/n22-case-study-ele-plc.html" title="N22 Case Study (ELE PLC)">N22 Case Study (ELE PLC)</a></li><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="M22 (Peacewick Uni)">M22 (Peacewick Uni)</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../44106/additional-exam-questions-paper-1.html" title="Additional exam questions (Paper 1)">Additional exam questions (Paper 1)</a></li></ul><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../32840/may-2020-p-s-trawlers.html" title="May 2020 (P&S Trawlers)">May 2020 (P&S Trawlers)</a></li><li class=" parent" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="M23 Paper 1">M23 Paper 1</a></li><ul class="level-4 "><li class="" style="padding-left: 56px"><i class="expander fa fa-caret-right "></i><a class="" href="../47825/paper-1-svt-study-guide-shirin-karimi.html" title="Paper 1 SVT Study Guide (Shirin Karimi)">Paper 1 SVT Study Guide (Shirin Karimi)</a></li></ul></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26095/exam-study-tips-resources.html" title="Exam & Study tips (resources)">Exam & Study tips (resources)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31342/revision-exams-top-tips.html" title="Revision & Exams - Top tips">Revision & Exams - Top tips</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../47460/top-tips-for-m23-exams.html" title="Top Tips for M23 Exams">Top Tips for M23 Exams</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43522/unit-1-intro-to-bm.html" title="Unit 1 - Intro to BM">Unit 1 - Intro to BM</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44034/11-what-is-a-business.html" title="1.1 What is a business?">1.1 What is a business?</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../../task/399681.html" title="1.2 Types of business entities">1.2 Types of business entities</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44041/13-business-objectives.html" title="1.3 Business objectives">1.3 Business objectives</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44044/14-stakeholders.html" title="1.4 Stakeholders">1.4 Stakeholders</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44045/15-growth-and-evolution.html" title="1.5 Growth and evolution">1.5 Growth and evolution</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44046/16-multinational-companies.html" title="1.6 Multinational companies">1.6 Multinational companies</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43530/unit-2-hrm.html" title="Unit 2 - HRM">Unit 2 - HRM</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44253/21-introduction-to-hrm.html" title="2.1 Introduction to HRM">2.1 Introduction to HRM</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44256/role-of-hrm.html" title="Role of HRM">Role of HRM</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44257/factors-that-influence-hr-planning.html" title="Factors that influence HR planning">Factors that influence HR planning</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44282/reasons-for-resistance-to-change.html" title="Reasons for resistance to change">Reasons for resistance to change</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44283/hr-strategies-for-reducing-the-impact-of-change-resistance-to-ch.html" title="HR strategies for reducing the impact of change & resistance to change">HR strategies for reducing the impact of change & resistance to change</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45458/21-true-or-false-quiz.html" title="2.1 True or False quiz">2.1 True or False quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43677/21-glossary-of-key-terms.html" title="2.1 Glossary of key terms">2.1 Glossary of key terms</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43875/22-organizational-structure.html" title="2.2 Organizational structure">2.2 Organizational structure</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44338/23-leadership-and-management.html" title="2.3 Leadership and management">2.3 Leadership and management</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45462/23-true-or-false-quiz.html" title="2.3 True or False Quiz">2.3 True or False Quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43829/24-motivation-and-demotivation.html" title="2.4 Motivation and demotivation">2.4 Motivation and demotivation</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44371/types-of-training.html" title="Types of training">Types of training</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44390/25-organizational-corporate-culture-hl.html" title="2.5 Organizational (corporate) culture (HL)">2.5 Organizational (corporate) culture (HL)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44247/26-communication.html" title="2.6 Communication">2.6 Communication</a></li></ul><li class="ancestor parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../43545/unit-3-finance.html" title="Unit 3 - Finance">Unit 3 - Finance</a></li><ul class="level-1 expanded"><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44435/31-introduction-to-finance.html" title="3.1 Introduction to finance">3.1 Introduction to finance</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44431/31-introduction-to-finance-role-of-finance.html" title="3.1 Introduction to finance - role of finance">3.1 Introduction to finance - role of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45634/31-glossary-of-key-term.html" title="3.1 Glossary of key term">3.1 Glossary of key term</a></li></ul><li class="ancestor parent" style="padding-left: 14px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../44436/32-sources-of-finance.html" title="3.2 Sources of finance">3.2 Sources of finance</a></li><ul class="level-2 expanded"><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44437/internal-sources-of-finance.html" title="Internal sources of finance">Internal sources of finance</a></li><li class="current" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="external-sources-of-finance.html" title="External sources of finance">External sources of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44479/appropriateness-of-sources-of-finance.html" title="Appropriateness of sources of finance">Appropriateness of sources of finance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45483/32-true-or-false-quiz.html" title="3.2 True or False Quiz">3.2 True or False Quiz</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../43688/32-glossary-of-key-terms.html" title="3.2 Glossary of key terms">3.2 Glossary of key terms</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44486/33-costs-and-revenues.html" title="3.3 Costs and revenues">3.3 Costs and revenues</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44492/34-final-accounts.html" title="3.4 Final accounts">3.4 Final accounts</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44593/35-profitability-liquidity-ratio-analysis.html" title="3.5 Profitability & liquidity ratio analysis">3.5 Profitability & liquidity ratio analysis</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44627/36-efficiency-ratio-analysis-hl-only.html" title="3.6 Efficiency ratio analysis (HL only)">3.6 Efficiency ratio analysis (HL only)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44493/37-cash-flow.html" title="3.7 Cash flow">3.7 Cash flow</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44515/38-investment-appraisal.html" title="3.8 Investment appraisal">3.8 Investment appraisal</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44519/net-present-value-npv-hl.html" title="Net present value (NPV) (HL)">Net present value (NPV) (HL)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44564/39-budgets-hl.html" title="3.9 Budgets (HL)">3.9 Budgets (HL)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43547/unit-4-marketing.html" title="Unit 4 - Marketing">Unit 4 - Marketing</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44637/41-introduction-to-marketing.html" title="4.1 Introduction to marketing">4.1 Introduction to marketing</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43823/42-marketing-planning.html" title="4.2 Marketing planning">4.2 Marketing planning</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44660/43-sales-forecasting-hl.html" title="4.3 Sales forecasting (HL)">4.3 Sales forecasting (HL)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44669/benefits-limitations-of-sales-forecasting.html" title="Benefits & limitations of sales forecasting">Benefits & limitations of sales forecasting</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44679/44-market-research.html" title="4.4 Market research">4.4 Market research</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44680/why-how-organizations-carry-out-market-research.html" title="Why & how organizations carry out market research">Why & how organizations carry out market research</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44720/45-the-seven-ps-of-the-marketing-mix.html" title="4.5 The seven Ps of the marketing mix">4.5 The seven Ps of the marketing mix</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44740/451-product.html" title="4.5.1 Product">4.5.1 Product</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44782/453-promotion.html" title="4.5.3 Promotion">4.5.3 Promotion</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44697/46-international-marketing-hl.html" title="4.6 International marketing (HL)">4.6 International marketing (HL)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43565/unit-5-operations-mgt.html" title="Unit 5 - Operations Mgt">Unit 5 - Operations Mgt</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44817/51-introduction-to-operations-management.html" title="5.1 Introduction to operations management">5.1 Introduction to operations management</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44812/52-operations-methods.html" title="5.2 Operations methods">5.2 Operations methods</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44861/53-lean-production-quality-management-hl.html" title="5.3 Lean production & quality management (HL)">5.3 Lean production & quality management (HL)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44840/55-break-even-analysis.html" title="5.5 Break-even analysis">5.5 Break-even analysis</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44890/56-production-planning-hl.html" title="5.6 Production planning (HL)">5.6 Production planning (HL)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45242/57-crisis-management-contingency-planning-hl.html" title="5.7 Crisis management & contingency planning (HL)">5.7 Crisis management & contingency planning (HL)</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45669/59-management-information-systems-hl.html" title="5.9 Management Information Systems (HL)">5.9 Management Information Systems (HL)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../43603/exams.html" title="Exams">Exams</a></li><ul class="level-1 "><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../43740/command-terms.html" title="Command terms">Command terms</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../45612/glossary-of-key-terms.html" title="Glossary of key 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<div id="main-column" class="span9"> <article id="external-sources-of-finance" style="margin-top: 16px;">
<h1 class="section-title">External sources of finance</h1>
<ul class="breadcrumb"><li><a title="Home" href="../../../businessmanagement.html"><i class="fa fa-home"></i></a><span class="divider">/</span></li><li><span class="gray">Unit 3 - Finance</span><span class="divider">/</span></li><li><span class="gray">3.2 Sources of finance</span><span class="divider">/</span></li><li><span class="active">External sources of finance</span></li></ul>
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<div class="panel panel-has-footer" style="box-shadow: rgba(17, 0, 51, 0.3) 0px 10px 30px -15px; border-color: rgb(61, 30, 128);"><div class="panel-heading" style="background-color: rgb(61, 30, 128);"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;">External sources of finance (AO2)</span></strong></p></div></div><div class="panel-body"><div><p><img alt="" height="183" src="../../../ib/businessmanagement/images/credit-card.jpg" width="300"></p><p><span style="color:#696969;"><em>"If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has."</em><br>- John Maynard Keynes (1883 - 1946), described by <em>The Economist </em>as 'Britain's most famous 20th-century economist.'</span></p><hr class="hidden"><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Sources of finance ar</strong>e the various ways that a business gets its money in order to run the business, such as from personal funds, share capital or bank loans. The sources of finance for a business can be classified as either <a href="../44437/internal-sources-of-finance.html" title="New syllabus 2022 » Unit 3 - Finance and Accounts (WIP) » 3.2 Sources of finance » Internal sources of finance">internal sources</a> or external sources.</span></p><p><span style="font-family:arial,helvetica,sans-serif;"><strong>External sources of finance</strong> are those that come from outside the organization, usually with the help of a third party provider. Due to the higher costs, external finance is only used when a business is unable to get enough funds from internal sources. There are eight sources of external finance stipulated in the IB Business Management syllabus:</span><span style="font-family:arial,helvetica,sans-serif;"></span></p><div class="row-fluid"><div class="span6 col-left"><div><ul class="branded"><li><p>Share capital</p></li><li><p>Loan capital</p></li><li><p>Overdrafts</p></li><li><p>Trade credit</p></li></ul></div></div><div class="span6"><div><ul class="branded"><li><p>Crowdfunding</p></li><li><p>Leasing</p></li><li><p>Microfinance providers</p></li><li><p>Business angels</p></li></ul></div></div></div><section class="tib-teacher-only" readonly="true" title="This box is not visible to students"><div class="header" readonly="true"><img class="icon" src="../../../thinkib/icons/teacher-only.svg"> Teacher only box</div><div class="content" readonly="false"><p><span style="color:#FF0000;"><strong>Note</strong></span></p><p><span style="color:#FF0000;">The following external sources of finance have been removed from the syllabus (final exams 2023):</span></p><div class="row-fluid"><div class="span6 col-left"><div><ul class="branded"><li><p><span style="color:#FF0000;">Grants</span></p></li><li><p><span style="color:#FF0000;">Subsidies</span></p></li></ul></div></div><div class="span6"><div><ul class="branded"><li><p><span style="color:#FF0000;"> Debt factoring</span></p></li><li><p><span style="color:#FF0000;">Venture capital</span></p></li></ul></div></div></div><span style="color:#FF0000;"> </span><p><span style="color:#FF0000;">Hence, there is no need to teach these. Be careful when using past exam papers as the above sources will appear in certain papers.</span></p><p><span style="color:#FF0000;">Instead, the following two external sources of finance have been added to the new course:</span></p><ul class="branded"><li><p><span style="color:#FF0000;">Crowdfunding</span></p></li><li><p><span style="color:#FF0000;">Microfinance providers (previously taught in Unit 1.2 as a business entity).</span></p></li></ul></div></section></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>1. Share capital (AO2)</strong></p></div></div><div class="panel-body"><div><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" height="203" src="../../../ib/businessmanagement/images/nyse(1).jpg" width="300"></span></p><p><span style="color:#696969;"><span style="font-family:arial,helvetica,sans-serif;"><em>The New York Stock Exchange, Wall Street, New York City</em></span></span></p><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Share capital</strong> (also known as <strong>equity capital</strong>) is finance raised through the issuing of shares via a stock exchange (or stock market). It is a long-term source of finance for limited liability companies, obtained by selling shares in the company. When a limited liability company sells its shares for the very first time on a public stock exchange, this is called an <strong>initial public offering</strong> (IPO).</span></p><div class="yellowBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;">Box 1 - The world's 11 largest IPOs</span></span></h5><ol><li><p>Saudi Aramco, Saudi Arabia, $29.4 billion</p></li><li><p>Alibaba.com, China, $25 billion</p></li><li><p>SoftBank, Japan, $23.5 billion</p></li><li><p>Agricultural Bank of China, China, $22.1 billion</p></li><li><p>Industrial & Commercial Bank of China (ICBC), China, $21.9 billion</p></li><li><p>AIA, Hong Kong SAR, $20.5 billion</p></li><li><p>General Motors, USA, $20.1 billion</p></li><li><p>NTT DoCoMo, Japan, $18.4 billion</p></li><li><p>VISA, USA, $17.8 billion</p></li><li><p>ENEL SpA, Italy, $17.4 billion</p></li><li><p>Facebook, USA, $16.0 billion</p></li></ol><p><span style="color:#696969;">Source: Adapted from </span><a href="http://www.statista.com/chart/19838/biggest-ipos/"><span style="color:#696969;">Statista</span></a></p></div><p><span style="font-family:arial,helvetica,sans-serif;">A stock exchange is a well-organized and highly regulated marketplace where individuals and businesses can buy and sell shares in public limited companies. Shares in private limited company cannot be traded on a stock exchange, as their shares are not sold to the public.</span></p><p><span style="font-family:arial,helvetica,sans-serif;">The main functions of a stock exchange are to:</span></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">enable existing companies to raise share capital (through a share issue)</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">oversees the initial public offering (IPO) of new public limited companies</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">to provide a market for trading of second-hand shares (and government bonds, although this isn’t covered in the IB syllabus).</span></p></li></ul><div class="yellowBg"><h5><span style="color:#FF0000;"><span style="font-family:arial,helvetica,sans-serif;">Box 2 - The world’s 10 oldest stock exchanges</span></span></h5><ol><li><p><span style="font-family:arial,helvetica,sans-serif;">Amsterdam Stock Exchange, 1602</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Paris Bourse, 1724</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Philadelphia Stock Exchange, 1790</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">London Stock Exchange, 1801</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Milan Stock Exchange, 1808</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">New York Stock Exchange, 1817</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Frankfurt Stock Exchange, 1820</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Bolsa de Madrid, 1831</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Toronto Stock Exchange, 1861</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Australian Stock Exchange, 1872</span></p></li></ol></div><p><strong><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Advantages of share capital</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">It is permanent capital as it does not need to be repaid (shareholders sell their shareholdings to other buyers via the stock exchange)</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">There are no interest payments made to shareholders, thus this reduces the expenses of the company</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Unlike loan capital, share capital does not involve debt or incur interest repayments.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Any public limited liability company can raise further finance by selling additional shares (a process known as a <strong>share issue</strong>).</span></p></li></ul><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Disadvantages of share capital</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">Shareholders need to (at some point) be paid dividends if the company earns a profit.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Although share capital can raise a lot of money for a company, the ownership and control of the organization may be diluted.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Only public limited companies can trade their shares using the stock market.</span></p></li></ul><div class="greenBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"><span class="snippet-fa fa fa-file-text-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Case study 1 - Petrobras</span></span></h5><p><span style="font-family:arial,helvetica,sans-serif;">Brazil’s largest oil company, Petrobras, holds the world record of raising $70 billion in a share issue (also called a rights issue). Read more about this in this BBC article by clicking the hyperlink <a href="http://www.bbc.co.uk/news/business-11400277">here</a>.</span></p></div><div class="greenBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"><span class="snippet-fa fa fa-file-text-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Case Study 2 - Alibaba.com</span></span></h5><p><span style="font-family:arial,helvetica,sans-serif;">Alibaba.com, China’s e-commerce giant, holds the world record for an initial public offering. In September 2010, the company raised $25 billion in its global initial public offering (IPO). Read more about this story here on the BBC <span style="font-family:arial,helvetica,sans-serif;">by clicking the hyperlink <a href="http://www.bbc.co.uk/news/business-29316074">here</a>.</span></span></p></div><p>To find out more about the stock market, watch this Netflix documentary. Many thanks to IB educator <strong>Gema Quintanilla</strong> for recommending this.</p><p><iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="360" src="https://www.youtube.com/embed/ZCFkWDdmXG8" title="Explained | The Stock Market | FULL EPISODE | Netflix" width="640"></iframe></p></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;">2. Loan capital (AO2)</span></strong></p></div></div><div class="panel-body"><div><p><img alt="" height="180" src="../../../ib/businessmanagement/bank.jpg" width="300"></p><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Loan capital</strong>, also known as <strong>debt capital</strong>, refers to borrowed funds from financial lenders, such as commercial banks. It is typically a long-term source of external finance, and is usually for the purchase of non-current assets (sometimes referred to as fixed assets). Hence, loan capital appears as part of non-current assets in the <a href="../44579/balance-sheets-1.html" title="New syllabus (first teaching 2022) » Unit 3 - Finance and Accounts » 3.4 Final accounts » Balance sheets">balance sheet</a>.</span></p><hr class="hidden"><p><span style="font-family:arial,helvetica,sans-serif;"></span></p><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Advantages of loan capital</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">It enables the borrower to repay in regular instalments, making loan capital more accessible and affordable for many businesses as it is not burdened by having to pay a large lump sum of money.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Large businesses are often able to negotiate a lower rate of interest on their loans (financial economies of scale).</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Loan capital is suitable if the owners need to raise finance but do not want to dilute their ownership or potentially lose control through issuing shares.</span></p></li></ul><p><span style="font-family:arial,helvetica,sans-serif;"></span></p><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Disadvantages of loan capital</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">Interest is charged on the amount of borrowed funds. The interest rate can be a fixed or variable rate.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">In many cases, businesses have to offer collateral (security) before loans can be approved. Failure to repay the loan can lead to the lender being able to legally seize the firm’s assets to pay for the outstanding amount borrowed.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Firms that borrow loan capital on variable interest rates may suffer from liquidity problems if the rate of interest increases, because their debt repayment burden will increase.</span></p></li></ul></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;">3. Overdrafts (AO2)</span></strong></p></div></div><div class="panel-body"><div><p><img alt="" height="187" src="../../../ib/businessmanagement/images/merger.png" width="300"></p><p><span style="font-family:arial,helvetica,sans-serif;">An <strong>overdraft </strong>is a banking service that enables customers (personal and business customers) to withdraw more money from their account than exists in the account. This can help businesses to meet their short-term liquidity needs, especially in emergency situations. The overdraft has to be pre-approved to avoid expensive bank charges, as does the maximum amount that can be overdrawn.</span></p><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Advantages of overdrafts</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">Overdrafts are quite easy to obtain, so are an important source of external finance for small businesses in particular.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Overdrafts provide businesses with emergency funds to finance their operations, such as making payment to suppliers or paying wages to staff, during times when liquidity is a problem.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">It provides great flexibility for businesses as overdrafts are only used as and when needed.</span></p></li></ul><hr class="hidden"><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Disadvantages of overdrafts</span></strong><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">Interest is charged on the amount overdrawn, usually at rates higher than those charged for ordinary bank loans.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Banks usually only lend a small amount of money, in order to keep a business operation; it is not a suitable source of finance for purchasing fixed assets, for example.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Banks can ask for overdrafts to be repaid at very short notice.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">It is essentially a high cost, short-term loan for businesses.</span></p></li></ul></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;">4. Trade credit (AO2)</span></strong></p></div></div><div class="panel-body"><div><p><img alt="" height="181" src="../../../ib/businessmanagement/images/money(2).jpg" width="300"></p><p>Whilst individual customers may use credit cards to pay for their purchases, business organizations use trade credit. <strong>Trade credit </strong>enables a customer to purchase and obtain goods and services but to pay for these at a later date. The supplier provides the trade credit to the customer (another business organization), which helps the purchaser’s cash flow as they can obtain supplies without having to pay for these immediately.</p><p>The typical trade credit period is between 30 to 90 days, depending on the industry in question. This means that it is possible to sell the goods bought before actually having to pay for them! Hence, trade credit can be an important external source of finance for businesses struggling with cash flow. Buying goods and services on trade credit does not incur any interest charges if the amount owed is paid in full within the trade credit period. This makes trade credit relatively attractive compared to overdrafts.</p></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>5. <span style="font-family:arial,helvetica,sans-serif;">Crowdfunding (AO2)</span></strong></p></div></div><div class="panel-body"><p><img alt="" src="../../../ib/businessmanagement/images/3-finance/crowdfunding.png" style="width: 300px; height: 151px;"></p><p><strong>Crowdfunding </strong>is an external source of finance that involves raising small amounts of money from a large number of people to fund a particular business project or venture. This is typically done via online platforms. These supporters are collectively known as the ‘crowd’ and the business entity is referred to as the 'fundraiser'. Crowdfunding is often used by musicians, filmmakers, and artists who have successfully raised finance to fund their commercial productions.</p><p>Typically, <strong>equity crowdfunding</strong> involves the sale of a stake in a business to a number of investors in the crowd. This works in a similar way to the sale of shares or finance raised by business angels, although the amount of money from each person is much lower. Many crowdfunding platforms operate an "all-or-nothing" funding model. This means that if the fundraiser does not reach the target needed to fund the business project or venture, every member of the crowd gets their money back. There is also <strong>donation-based crowdfunding</strong>, in which case individuals donate small amounts of money to help fund a specific charitable project while receiving no financial stake or return for doing so.</p><p><span class="snippet-fa fa fa-youtube fa-lg" style="color: rgb(202, 72, 26);"> </span> Watch this short video about the operations of Indiegogo, a popular US crowdfunding company.</p><p><iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="360" src="https://www.youtube.com/embed/Inqqu0MnzGE" title="Why Indiegogo" width="640"></iframe></p><p>Crowdfunding has become popular recently with small and medium-sized enterprises. This is mainly because commercial banks have been less willing to lend money due to the aftermath of the global financial crisis of 2007 - 2009 and ongoing COVID-19 pandemic. At the same time, people with savings have received very low rates of interest on their cash deposits at banks since the global financial crisis. Coupled with higher rates of inflation in the post-COVID era, this means savers are actually losing value on their savings over time as the rate of the rise in average price levels exceeds the interest rate for savings. Consequently, crowdfunding becomes a relatively more attractive investment option for people with savings.</p><p>Here is an example of a student-led project at the University of Portsmouth in the UK that relies on crowdfunding as the main source of finance. The crowdfunding campaign video is below. More details of the project can be found on the Indiegogo webpage <a href="https://www.indiegogo.com/projects/tempest-short-film#/">here</a>.</p><p><iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="360" src="https://www.youtube.com/embed/BD4wm10HCOM" title="Tempest - Short Film 2023 - Crowdfunding Campaign Video" width="640"></iframe></p><hr class="hidden"><p><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong>Advantages of crowdfunding</strong></p><ul class="branded"><li><p>As each individual lends a relatively small amount of money to the fundraiser, this limits the risks and impacts should the business project fail to succeed.</p></li><li><p>It avoids the need for business owners or entrepreneurs to deal with commercial banks, which is often a time-consuming and bureaucratic process.</p></li><li><p>Many people can invest in the business, so this can help to raise lots of much-needed finance for small to medium-sized enterprises.</p></li><li><p>Unlike business angels, individuals of the crowd do not take any controlling interest in the organization.</p></li><li><p>Crowdfunding is usually less costly than being listed on a public stock exchange.</p></li></ul><hr class="hidden"><p><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong>Disadvantages of crowdfunding</strong></p><ul class="branded"><li><p>There are legal challenges and considerations, such as transparent disclosure of legal documents, holding annual general meetings with investors, and publication of annual reports. This adds to the costs of the business.</p></li><li><p>There needs to be due diligence (investigation and exercise of care prior to entering into a contractual agreement with another entity). Investors have the option to ask for additional information from the fundraiser, so this can delay decision making and incur additional costs for the business.</p></li><li><p>Theft of intellectual property is commonplace. Entrepreneurs are vulnerable to others stealing their business ideas, largely due to the absence of intellectual property protection (see Unit 5.8 Research and development) in terms of the lack of knowledge and finance to defend these rights.</p></li><li><p>There are a lot of cases of crowdfunding scams. The loose regulatory requirements for crowdfunding in many parts of the world exposes investors to fraud.</p></li></ul><div class="yellowBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"><span class="snippet-fa fa fa-file-text-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Case Study 3 - Crowdfunding for a greener Ghana</span></span></h5><p>Watch this short video that features <em>Franky Green's</em> crowdfunding platform that supports <em>Goodroll</em>, a Ghananian producer of toilet paper made from sustainable bamboo.</p><p>Whilst watching this video, consider how the role of crowdfunding in supporting sustainable business activities. You may also wish to refer to the key concept of <a href="../43435/sustainability.html" title="New syllabus 2022 » The 4 key concepts » Sustainability">sustainability</a>.</p><p><iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="360" src="https://www.youtube.com/embed/fTqcHLyYBQY" title="YouTube video player" width="640"></iframe></p></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>6. <span style="font-family:arial,helvetica,sans-serif;">Leasing (AO2)</span></strong></p></div></div><div class="panel-body"><div><p><img alt="" height="202" src="../../../ib/businessmanagement/images/leasing.jpg" width="300"></p><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Leasing </strong>involves the business or customer (known as the <em>lessee</em>) drawing up a contract with the leasing company (known as the <em>lessor</em>) to use particular fixed assets for an agreed fee. Example of leased fixed assets included: machinery, tools, equipment, photocopiers, computers, vehicles or premises. It <span style="font-family:arial,helvetica,sans-serif;">is a common option for businesses to access fixed assets without the high costs of capital expenditure.</span></span></p><p><span style="font-family:arial,helvetica,sans-serif;">Leasing enables a business to use these assets without having to purchase them outright (which may be unnecessary or too expensive for some businesses). In many cases, the lessor allows a long-term lessee (usually lasting three or more years) the option to buy the asset at the end of the lease agreement.</span></p><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" height="244" src="../../../ib/businessmanagement/images/printer-maintenance.jpg" width="277"></span></p><p><span style="color:#696969;"><span style="font-family:arial,helvetica,sans-serif;"><em>The lessor is responsible for maintaining leased equipment</em></span></span></p><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Advantages of leasing</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">The lessor does not have to purchase the expensive equipment, machinery, vehicles or other type of capital. Instead, its money can be used for revenue expenditure purposes.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">The lessor takes responsibility for the maintenance of the capital equipment and other leased property. This helps to cut the operating costs of the lessee.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Leasing is particularly advantageous if the business only needs to use the fixed capital for a short period of time, or if it does not want to deal with the hassles and costs of repairs and maintenance.</span></p></li></ul><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Disadvantages of <span style="font-family:arial,helvetica,sans-serif;">leasing</span></span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">With leasing, the lessee never owns the asset. Ownership remains with the lessor (the leasing company) before, during and after the leasing contract.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Over a long period of time, leasing can be more expensive than buying the asset outright due to the accumulated costs of leasing the asset over time.</span></p></li></ul></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong><span style="font-family:arial,helvetica,sans-serif;">7. Microfinance providers (AO2)</span></strong></p></div></div><div class="panel-body"><div><p><span style="font-family:arial,helvetica,sans-serif;"><img alt="" height="176" src="../../../ib/businessmanagement/images/microfinance-helping-vietnamese-woman.jpg" width="300"></span></p><p><span style="color:#696969;"><span style="font-family:arial,helvetica,sans-serif;"><em>Microfinance has helped female entrepreneurs in Vietnam</em></span></span></p><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Microfinance providers </strong>are for-profit social enterprises that offer a financial service to those without a job or on very low incomes. These members of society would not ordinarily be able to secure bank loans. The concept of microfinance was developed by Nobel Prize winner Muhammad Yunus (<a href="http://www.muhammadyunus.org/">http://www.muhammadyunus.org/</a>) in 2006, in association with the Grameen Bank.</span></p><p><span style="font-family:arial,helvetica,sans-serif;">The aim of providing microfinance is to help entrepreneurs, especially women, struggling to finance their business start-ups to gain access to loans of a small amount. Microfinance can give these people the opportunity to become self-sufficient and empower them to run their businesses. As with the majority of loans, interest is charged on the amount borrowed, although these are typically lower than what commercial banks would charge.</span></p><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Advantages of microfinance providers</span></strong></p><p>The advantages of establishing a business as a microfinance provider as a form of for-profit social enterprise include:</p><ul class="branded"><li><span style="font-family:arial,helvetica,sans-serif;">Microfinance can help many people to get out of poverty by making them become financially independent.</span></li><li><span style="font-family:arial,helvetica,sans-serif;">Around half of the world’s people live on less than $2 a day, (with the vast majority of these living in low-income countries or highly indebted poor countries) so microfinance can help to provide poverty relief.</span></li><li><span style="font-family:arial,helvetica,sans-serif;">They help to empower entrepreneurs of small businesses, especially women and the underprivileged working and living in low-income countries.</span></li><li><span style="font-family:arial,helvetica,sans-serif;">Microfinance can create benefits for the wider community, such as improved healthcare, education and employment opportunities.</span></li><li><span style="font-family:arial,helvetica,sans-serif;">Microfinance providers act in a socially responsible way by helping the poorest and most vulnerable adults in society.</span></li><li><span style="font-family:arial,helvetica,sans-serif;">Microfinance can help to build and foster a culture of entrepreneurialship and economic independence.</span></li></ul><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Disadvantages of microfinance providers</span></strong></p><p>However, there are potential drawbacks of establishing a business as a microfinance provider. These limitations include the following points:</p><ul class="branded"><li><span style="font-family:arial,helvetica,sans-serif;">Some people regard the practice of microfinance providers as being unethical as they earn profits from low-income individuals and households.</span></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Microfinance only provides finance on a small scale, so is unlikely to be sufficient to make a real difference to society as a whole.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Microfinance loans incur interest charges, so can be rather expensive for small business owners who find it difficult to earn enough revenue to keep up with their loan repayments.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Microfinance increases the debts of entrepreneurs who may subsequently struggle in their business venture.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Due to relatively low profitability, microfinance providers may struggle to attract and/or retain employees and managers, given that their remuneration packages are unlikely to be matched by larger for-profit financial companies such as commercial banks and insurance companies.</span></p></li></ul><div class="yellowBg"><h5><span style="color:#FF0000;"><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-file-text-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Case Study 4 - M-Pesa offering financial opportunities in Kenya</span></span></h5><p><img alt="" src="../../../ib/businessmanagement/images/businesses/m-pesa-mobile.png" style="width: 300px; height: 171px;"></p><p>M-Pesa (<em>M </em>for mobile, <em>pesa </em>is Swahili for 'money') is a mobile phone-based money transfer, financing and microfinancing service. It was launched in 2007 by Vodafone in collaboration with Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania respectively. M-Pesa has since expanded to Afghanistan, South Africa, India, Romania and Albania. M-Pesa allows users to deposit, withdraw and transfer money as well as pay for goods and services easily using a mobile device, such as a smartphone.</p><p>As a mobile banking service, M-Pesa does not have any branches. Its customers can deposit and withdraw money from a network of agents that includes resellers and retail outlets acting as banking agents. With lower operating costs, M-Pesa can reach out to a larger number of people. M-Pesa's customers are charged a small fee for sending and withdrawing money using the service.</p><p>The service has been praised for giving millions of people access to the formal financial systems and for reducing crime in otherwise largely cash-based societies. Within the first five years of its operations, M-Pesa had registered about 17 million accounts in Kenya, and about 7 million accounts in Tanzania.</p><p><span style="color:#696969;"><em>Source</em>: Adapted from</span> <a href="http://www.nytimes.com/2014/01/21/opinion/kenyasbanking- revolution-lights-a-fire.html">The New York Times</a></p></div></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>8. Business angels (AO2)</strong></p></div></div><div class="panel-body"><div><p><img alt="" src="../../../ib/businessmanagement/images/finance---business-angel.jpg" style="width: 260px; height: 187px;"></p><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Business angels</strong> (or <strong>angel investors</strong>) are wealthy and successful private individuals who risk their own money in a business venture that has high growth potential. The finance from business angels is their own (personal investors). This <span style="font-family:arial,helvetica,sans-serif;">external </span>source of finance represents a high degree of risk.</span></p><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"></span></strong><span class="snippet-fa fa fa-check-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> <strong><span style="font-family:arial,helvetica,sans-serif;">Advantages of business angels</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">Business angels provide an essential source of finance for start-ups and small businesses that are unable to secure finance from conventional providers of finance, such as commercial banks and other financial institutions.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">The business can benefit from the expertise and experiences of the business angels, who are likely to provide their input in order to secure a significant return on their investment (ROI).</span></p></li><li><p>It is particularly useful for small businesses and inexperienced entrepreneurs who are unable to raise sufficient finance on their own, such as those which are unable to secure loan capital or those that are not permitted to sell shares on a public stock exchange.</p></li></ul><hr class="hidden"><p><strong><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-times-circle-o fa-lg" style="color: rgb(103, 7, 124);"> </span> Disadvantages of business angels</span></strong></p><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;">For the business angels, such business ventures are extremely high risk, especially as they risk losing their personal money. Hence, the amount of finance available is often not easily available for start-ups and small businesses.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">This also means that there are no guarantees than angel investors will earn a satisfactory ROI, <span style="font-family:arial,helvetica,sans-serif;">despite the high potential returns.</span></span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">Such finance is difficult to come by, not only due to the risks involved but also due to the large number of entrepreneurs competing for such funds. You only have to watch an episode of <em>Dragon’s Den </em>or <em>Shark Tank</em> to realise this.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">The use of business angels will dilute the firm’s control and ownership as the angel investors will want a share and say in the organization.</span></p></li></ul><div class="greenBg"><h5><span style="font-family:arial,helvetica,sans-serif;"><span style="color:#FF0000;"><span class="snippet-fa fa fa-cogs fa-lg" style="color: rgb(103, 7, 124);"> </span> Theory of Knowledge (TOK)</span></span></h5><p><span style="font-family:arial,helvetica,sans-serif;">Business angels have to rely on their intuition as a way of knowing what to do and what not to do. By contrast, bank managers use scientific decision making and rely on reasoning to make their choices.</span></p><p><span style="font-family:arial,helvetica,sans-serif;">How can investors, such as business angels, truly justify that they “know” a particular business venture will succeed?</span></p></div></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Key terms</strong></p></div></div><div class="panel-body"><div><ul class="branded"><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Business angels</strong> are wealthy and successful private individuals who risk their own money in a business venture that has high growth potential.</span></p></li><li><p><strong>Crowdfunding </strong>is an external source of finance that involves raising small amounts of money from a large number of people to fund a particular business project or venture, typically via online platforms.</p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>External sources of finance</strong> are those that come from outside the organization, usually with the help of a third party provider.</span></p></li><li><p>A<span style="font-family:arial,helvetica,sans-serif;">n <strong>initial public offering</strong> (IPO) occurs when <span style="font-family:arial,helvetica,sans-serif;">a limited liability company sells its shares for the very first time on a public stock exchange.</span></span></p></li><li><p>The <strong>interest rate</strong> is the price of money over a period of time. It can refer to the cost of borrowing money or the reward for saving money, expressed as a percentage figure.</p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Leasing </strong>involves the business or customer drawing up a contract with the leasing company to use particular fixed assets for an agreed fee.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Loan capital</strong> (or <strong>debt capital</strong>) refers to borrowed funds from financial lenders, such as commercial banks, usually for the purchase of fixed assets.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Microfinance providers </strong>are for-profit social enterprises that offer a financial service to those without a job or on very low incomes.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;">An <strong>overdraft </strong>is a banking service that enables customers (personal and business customers) to withdraw more money from their account than exists in the account.</span></p></li><li><p><span style="font-family:arial,helvetica,sans-serif;"><strong>Share capital</strong> (or <strong>equity capital</strong>) is finance raised through the issuing of shares via a public stock exchange.</span></p></li><li><p><strong>Trade credit </strong>is an external source of finance that enables customers to purchase and obtain products but to pay for these at a later date.</p></li></ul></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Exam Practice Question</strong></p></div></div><div class="panel-body"><div><h5><span style="color:#FF0000;"><span style="font-family:arial,helvetica,sans-serif;"><span class="snippet-fa fa fa-pencil-square-o fa-lg"> </span> </span><span style="font-family:arial,helvetica,sans-serif;">Exam Practice Question - Venturing in the beauty industry</span></span></h5><p><img alt="" src="../../../ib/businessmanagement/images/one-use/wigs.png" style="width: 260px; height: 173px;"></p><p>According to <em>Forbes</em>, the the global hair wigs and extensions <strong>market size</strong> has been valued at $5.8 billion in 2021 and it expected to skyrocket to reach $13.3 billion by 2026. The readily available supply of high-quality wigs and the growth in average disposable incomes, as well as the increase in hair loss rates and the popularity of personal grooming and beauty products, have driven growth in the industry.</p><p>The growth prospects for the industry has attracted a large number of <strong>business angels </strong>to invest in the market for the long-term. According to data from the Centre for Venture Research at the University of New Hampshire, the number of female angel investors has increased nearly eightfold, from over 11,000 to almost 94,000 in 2019.</p><p><span style="color:#696969;">Source: adapted from </span><em><a href="https://www.forbes.com/sites/geristengel/2021/05/12/black-female-founder-uses-network-to-raise-vc-funds-for-black-oriented-business/?sh=74ade1294335"><span style="color:#696969;">Forbes</span></a></em></p><table border="0" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:47px;"><p>(a)</p></td><td style="width:501px;"><p>Define the term <em>market size.</em></p></td><td style="width:94px;"><p align="right"><em>[2 marks]</em></p></td></tr><tr><td style="width:47px;"><p>(b)</p></td><td style="width:501px;"><p>Calculate the forecasted percentage increase in the value of the global hair wigs market.</p></td><td style="width:94px;"><p align="right"><em>[2 marks]</em></p></td></tr><tr><td style="width:47px;"><p>(c)</p></td><td style="width:501px;"><p>Define the term <em>business angels.</em></p></td><td style="width:94px;"><p align="right"><em>[2 marks]</em></p></td></tr><tr><td style="width:47px;">(d)</td><td style="width:501px;">Explain <strong>one </strong>reason for and <strong>one </strong>reason against the use business angels to generate long-term investment in the beauty industry.</td><td style="width: 94px; text-align: right;"><em>[4 marks]</em></td></tr></tbody></table><section class="tib-teacher-only" readonly="true" title="This box is not visible to students"><div class="header" readonly="true"><img class="icon" src="../../../thinkib/icons/teacher-only.svg"> Teacher only box</div><div class="content" readonly="false"><p><span style="color:#FF0000;"><strong>Answers</strong></span></p><p><strong>(a) Define the term <em>market size. </em><em> [2 marks]</em></strong></p><p><span style="color:#FF0000;">Market size refers to the total number of individual customers or the value of total sales revenue in a certain market. The size of a market can be measured in a number of ways, but usually refers to the number of people in a certain market who are potential customers of a product or service.</span></p><p><span style="color:#FF0000;">Award<em> [1 mark] </em>for a vague definition that shows some understanding of market share.</span></p><p><span style="color:#FF0000;">Award<em> [2 marks] </em>for an accurate definition that shows good understanding of the term market share, similar to the example above.</span></p><hr class="hidden"><p><strong>(b) Calculate the forecasted percentage increase in the value of the global hair wigs market. <em> [2 marks]</em></strong></p><ul><li><span style="color:#FF0000;">Percentage change = ($13.3bn – $5.8bn) / $5.8bn = 129.31%</span></li><li><span style="color:#FF0000;">Accept answers that show 130%</span></li></ul><p><span style="color:#FF0000;">Award<em> [1 mark] </em>for the correct answer, and <span style="color:#FF0000;"><em>[1 mark] </em>for showing appropriate working out.</span></span></p><hr class="hidden"><p><strong>(c) Define the term <em>business angels. [2 marks]</em></strong></p><p><span style="color:#FF0000;">Business angels are wealthy and successful private investors who risk their own money in <span style="color:#FF0000;"> start-up firms and/or small but expanding business </span>ventures that have <span style="color:#FF0000;">significant </span>growth potential. In return, they gain part-ownership of such businesses.</span></p><p><span style="color:#FF0000;">Award<em> [1 mark] </em>for a vague definition that shows some understanding.</span></p><p><span style="color:#FF0000;">Award<em> [2 marks] </em>for an accurate definition that shows good understanding, similar to the example above.</span></p><hr class="hidden"><p><strong>(d) Explain <u>one</u> reason for and <u>one</u> reason against the use business angels to generate long-term investment in the beauty industry. <em> [4 marks]</em></strong></p><p><span style="color:#FF0000;">The use of business angels can be an effective way for businesses to generate much-needed start-up capital and possibly a long-term investment. A business angel is a high net worth individual who looks to take an equity stake in a commercial business that seems to have growth potential, such as those in the hair wigs and extension market that is expected to grow by around 130% within the 5 years up to 2026.</span></p><p><span style="color:#FF0000;">Although the financial rewards can be high for venture capitalists, investments such as these are extremely risky and so the businesses receiving the funds from angel investors may have to give up a very high proportion of their business in return.</span></p><p><span style="color:#FF0000;"><em>Mark as a 2 + 2.</em></span></p><p><span style="color:#FF0000;">Award <em>[1 mark] </em>for identifying a relevant advantage (and disadvantage), and<em> [1 mark]</em> for the explanation, written in the context of the case study, up to the maximum of <em>[4 marks]</em>.</span></p></div></section></div></div><div class="panel-footer"><div></div></div></div><div class="panel panel-purple panel-expandable"><div class="panel-heading"><a class="expander pull-right" href="#"><span class="fa fa-plus"></span></a><div><p><strong>Quiz - External sources of finance</strong></p></div></div><div class="panel-body"><div><p>Review your understanding of external sources of finance by answering the questions below.</p><div class="tib-quiz" data-quiz-id="2475" data-structure="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" data-score-answers="6d4a526a457a48584f763758344a7649472f76324c53614b78524c393439595570496d5a5971374b38686f3d"><p> </p>
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<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">entrepreneurs</span> <span class="q-text-draggable draggable" draggable="true">angels</span> <span class="q-text-draggable draggable" draggable="true">medium</span> <span class="q-text-draggable draggable" draggable="true">high</span> <span class="q-text-draggable draggable" draggable="true">business</span> <span class="q-text-draggable draggable" draggable="true">investors</span> <span class="q-text-draggable draggable" draggable="true">low</span> <span class="q-text-draggable draggable" draggable="true">large</span></p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> are wealthy <input type="text" style="height: auto;"> <span class="review"></span> who risk their own money by investing in small to <input type="text" style="height: auto;"> <span class="review"></span> sized businesses that have <input type="text" style="height: auto;"> <span class="review"></span> growth potential.</p>
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<p><strong>Business angels </strong>are wealthy <strong>entrepreneurs </strong>who risk their own money by investing in small to <strong>medium </strong>sized businesses that have <strong>high </strong>growth potential.</p>
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<p> </p>
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<p> </p>
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">fixed </span> <span class="q-text-draggable draggable" draggable="true">variable</span> <span class="q-text-draggable draggable" draggable="true">capital</span> <span class="q-text-draggable draggable" draggable="true">stocks</span> <span class="q-text-draggable draggable" draggable="true">labour</span> <span class="q-text-draggable draggable" draggable="true">current</span> <span class="q-text-draggable draggable" draggable="true">long term</span> <span class="q-text-draggable draggable" draggable="true">land</span> </p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> expenditure is the spending on items considered as <input type="text" style="height: auto;"> <span class="review"></span> assets (such as <input type="text" style="height: auto;"> <span class="review"></span> , buildings, machinery and motor vehicles) rather than on <input type="text" style="height: auto;"> <span class="review"></span> assets (such as <input type="text" style="height: auto;"> <span class="review"></span> or inventories).</p>
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<p><strong>Capital </strong>expenditure is the spending on items considered as <strong>fixed </strong>assets (such as <strong>land</strong>, buildings, machinery and motor vehicles) rather than on <strong>current </strong>assets (such as <strong>stocks </strong>or inventories).</p>
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<div class="exercise">
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<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">internal</span> <span class="q-text-draggable draggable" draggable="true">public</span> <span class="q-text-draggable draggable" draggable="true">private</span> <span class="q-text-draggable draggable" draggable="true">shares</span> <span class="q-text-draggable draggable" draggable="true">assets</span> <span class="q-text-draggable draggable" draggable="true">stock</span> <span class="q-text-draggable draggable" draggable="true">initial</span> <span class="q-text-draggable draggable" draggable="true">ownership</span> <span class="q-text-draggable draggable" draggable="true">offer</span> <span class="q-text-draggable draggable" draggable="true">company</span> </p>
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<p>An <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> (IPO) refers to the original sales of a company’s <input type="text" style="height: auto;"> <span class="review"></span> listed on a public <input type="text" style="height: auto;"> <span class="review"></span> exchange, i.e. the <input type="text" style="height: auto;"> <span class="review"></span> sells its shares to the general public for the first time.</p>
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<p>An <strong>initial public offer</strong> (IPO) refers to the original sales of a company’s <strong>shares </strong>listed on a public <strong>stock </strong>exchange, i.e. the <strong>company</strong> sells its shares to the general public for the first time.</p>
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<div class="q-question">
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">internal</span> <span class="q-text-draggable draggable" draggable="true">external</span> <span class="q-text-draggable draggable" draggable="true">bank</span> <span class="q-text-draggable draggable" draggable="true">business</span> <span class="q-text-draggable draggable" draggable="true">purchase</span> <span class="q-text-draggable draggable" draggable="true">instalment</span> <span class="q-text-draggable draggable" draggable="true">credit</span> <span class="q-text-draggable draggable" draggable="true">hire</span> <span class="q-text-draggable draggable" draggable="true">assets</span> </p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> is an <input type="text" style="height: auto;"> <span class="review"></span> source of finance that enables firms to use <input type="text" style="height: auto;"> <span class="review"></span> without having to pay for them in one lump sum. Once the final repayment ( <input type="text" style="height: auto;"> <span class="review"></span> ) has been made, the asset then legally belongs to the <input type="text" style="height: auto;"> <span class="review"></span> .</p>
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<p><strong>Hire</strong> <strong>purchase</strong> is an <strong>external </strong>source of finance that enables firms to use <strong>assets </strong>without having to pay for them in one lump sum. Once the final repayment (or <strong>instalment</strong>) has been made, the asset is then legally owned by the <strong>business</strong>.</p>
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<p> </p>
<div class="exercise">
<div class="q-question">
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">internal</span> <span class="q-text-draggable draggable" draggable="true">shares</span> <span class="q-text-draggable draggable" draggable="true">start-up</span> <span class="q-text-draggable draggable" draggable="true">project</span> <span class="q-text-draggable draggable" draggable="true">venture</span> <span class="q-text-draggable draggable" draggable="true">share</span> <span class="q-text-draggable draggable" draggable="true">capital</span> <span class="q-text-draggable draggable" draggable="true">external</span> </p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> is high-risk capital as a source of <input type="text" style="height: auto;"> <span class="review"></span> finance funded by specialist finance firms, usually to support a business <input type="text" style="height: auto;"> <span class="review"></span> . It is usually provided in the form of loans and/or <input type="text" style="height: auto;"> <span class="review"></span> in the business.</p>
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<p><strong>Venture capital</strong> is high-risk capital as a source of <strong>external</strong> finance funded by specialist finance firms, usually to support a business <strong>start-up</strong>. It is usually provided in the form of loans and/or <strong>shares </strong>in the business.</p>
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<p> </p>
<div class="exercise">
<div class="q-question">
<p> </p>
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">expenditure</span> <span class="q-text-draggable draggable" draggable="true">capital</span> <span class="q-text-draggable draggable" draggable="true">routine</span> <span class="q-text-draggable draggable" draggable="true">one-off</span> <span class="q-text-draggable draggable" draggable="true">ordinary</span> <span class="q-text-draggable draggable" draggable="true">rent</span> <span class="q-text-draggable draggable" draggable="true">machinery</span> <span class="q-text-draggable draggable" draggable="true">revenue</span> </p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> is the day-to-day or <input type="text" style="height: auto;"> <span class="review"></span> spending of a business, required for its <input type="text" style="height: auto;"> <span class="review"></span> operations. Examples include the payment of <input type="text" style="height: auto;"> <span class="review"></span> , raw materials, wages, salaries, and utility bills.</p>
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<p><strong>Revenue expenditure</strong> is the day-to-day or <strong>routine</strong> spending of a business, required for its <strong>ordinary</strong> operations. Examples include the payment of <strong>rent</strong>, raw materials, wages, salaries, and utility bills.</p>
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<p> </p>
<div class="exercise">
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<p> </p>
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">liability</span> <span class="q-text-draggable draggable" draggable="true">preferential</span> <span class="q-text-draggable draggable" draggable="true">ordinary</span> <span class="q-text-draggable draggable" draggable="true">wages</span> <span class="q-text-draggable draggable" draggable="true">external</span> <span class="q-text-draggable draggable" draggable="true">limited</span> <span class="q-text-draggable draggable" draggable="true">unlimited</span> <span class="q-text-draggable draggable" draggable="true">dividends</span> <span class="q-text-draggable draggable" draggable="true">shares</span> </p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> are a source of external finance. They are the most common type of shares issued by a <input type="text" style="height: auto;"> <span class="review"></span> <input type="text" style="height: auto;"> <span class="review"></span> company, giving shareholders (owners) voting rights and <input type="text" style="height: auto;"> <span class="review"></span> based on the company’s declared profits.</p>
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<p><strong>Ordinary shares </strong>are a source of external finance. They are the most common type of shares issued by a limited <strong>liability company</strong>, giving shareholders (owners) voting rights and <strong>dividends </strong>based on the company’s declared profits.</p>
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<div class="q-question">
<p> </p>
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">fixed</span> <span class="q-text-draggable draggable" draggable="true">variable</span> <span class="q-text-draggable draggable" draggable="true">interest</span> <span class="q-text-draggable draggable" draggable="true">capital</span> <span class="q-text-draggable draggable" draggable="true">debentures</span> <span class="q-text-draggable draggable" draggable="true">Shares</span> <span class="q-text-draggable draggable" draggable="true">long</span> <span class="q-text-draggable draggable" draggable="true">short</span> <span class="q-text-draggable draggable" draggable="true">ownership</span> <span class="q-text-draggable draggable" draggable="true">employment</span></p>
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<p> <input type="text" style="height: auto;"> <span class="review"></span> are a <input type="text" style="height: auto;"> <span class="review"></span> term source of external finance, providing the investors with a <input type="text" style="height: auto;"> <span class="review"></span> rate of return (annual <input type="text" style="height: auto;"> <span class="review"></span> payments), but without any <input type="text" style="height: auto;"> <span class="review"></span> or voting rights to the business.</p>
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<p><strong>Debentures </strong>are a <strong>long </strong>term source of external finance, providing the investors with a <strong>fixed</strong> rate of return (annual <strong>interest </strong>payments), but without any <strong>ownership</strong> or voting rights to the business.</p>
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<div class="exercise">
<div class="q-question">
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">bank</span> <span class="q-text-draggable draggable" draggable="true">lender</span> <span class="q-text-draggable draggable" draggable="true">asset</span> <span class="q-text-draggable draggable" draggable="true">long</span> <span class="q-text-draggable draggable" draggable="true">short</span> <span class="q-text-draggable draggable" draggable="true">overdraft</span> <span class="q-text-draggable draggable" draggable="true">instalment</span></p>
</div>
<div class="q-answer">
<p>An <input type="text" style="height: auto;"> <span class="review"></span> is a <input type="text" style="height: auto;"> <span class="review"></span> term source of external finance which is repayable ‘on demand’. Customers have to have an account with the particular financial <input type="text" style="height: auto;"> <span class="review"></span> (a commercial <input type="text" style="height: auto;"> <span class="review"></span> ) in order to qualify for an overdraft.</p>
</div>
<div class="q-explanation">
<p>An <strong>overdraft </strong>is a <strong>short </strong>term source of external finance which is repayable ‘on demand’. Customers have to have an account with the particular financial <strong>lender</strong> (a commercial <strong>bank</strong>) in order to qualify for an overdraft.</p>
</div>
<div class="actions"><span class="score" data-score="0"></span><button class="btn check"><i class="fa fa-check-square-o"></i> Check</button></div></div>
<p> </p>
<div class="exercise">
<div class="q-question">
<p> </p>
<p class="gap-drop"> <span class="q-text-draggable draggable" draggable="true">funds</span> <span class="q-text-draggable draggable" draggable="true">loan</span> <span class="q-text-draggable draggable" draggable="true">capital</span> <span class="q-text-draggable draggable" draggable="true">internal</span> <span class="q-text-draggable draggable" draggable="true">external</span> <span class="q-text-draggable draggable" draggable="true">overdraft</span> <span class="q-text-draggable draggable" draggable="true">gearing</span> <span class="q-text-draggable draggable" draggable="true">debt</span></p>
</div>
<div class="q-answer">
<p>Owners’ <input type="text" style="height: auto;"> <span class="review"></span> comes from <input type="text" style="height: auto;"> <span class="review"></span> stakeholders, including shareholders’ <input type="text" style="height: auto;"> <span class="review"></span> . By contrast, <input type="text" style="height: auto;"> <span class="review"></span> capital comes from <input type="text" style="height: auto;"> <span class="review"></span> sources, for which there are interest charges, which subsequently increases the firm’s level of <input type="text" style="height: auto;"> <span class="review"></span> .</p>
</div>
<div class="q-explanation">
<p>Owners’ <strong>capital </strong>comes from <strong>internal </strong>stakeholders, including shareholders’ <strong>funds</strong>. By contrast, <strong>loan </strong>capital comes from <strong>external</strong> sources, for which there are interest charges, which subsequently increases the firm’s level of <strong>gearing</strong>.</p>
</div>
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<p> </p>
<div class="totals"><span class="score">Total Score: </span><button class="btn btn-success check-total"><i class="fa fa-check-square-o"></i> Check</button></div></div><hr></div></div><div class="panel-footer"><div></div></div></div><p><span style="font-family:arial,helvetica,sans-serif;">Return to the <a href="../44436/32-sources-of-finance.html" title="New syllabus 2022 » Unit 3 - Finance and Accounts (WIP) » 3.2 Sources of finance">Unit 3.2 - Sources of finance</a> homepage</span><span style="font-family:arial,helvetica,sans-serif;"></span></p><p><span style="font-family:arial,helvetica,sans-serif;">Return to the <a href="../43545/unit-3-finance-and-accounts-wip.html" title="New syllabus 2022 » Unit 3 - Finance and Accounts (WIP)">Unit 3 - Finance and accounts</a> homepage</span></p><p><span style="font-family:arial,helvetica,sans-serif;"><a href="../../../businessmanagement.html"><img alt="" src="../../../ib/businessmanagement/logo-blue-black-1.png" style="width: 170px; height: 54px;"></a></span></p><script>document.querySelectorAll('.tib-teacher-only').forEach(e => e.remove());</script>
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