CAIE IGCSE Business Studies 5.1 business finance
Use this business-finance page to explain finance needs, apply working-capital issues and choose suitable finance sources for cases.
- Syllabus
- 2027–2029
- Course
- Business 0264
Exam points
- Explain why finance is needed for start-up, expansion, assets, technology or working capital.
- Apply working-capital problems to day-to-day bills, inventory and business survival.
- Choose finance sources by considering amount needed, time period, cost and risk.
Covered syllabus points
5.1. Business finance question 1
[Maximum number: 4]
Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar's business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.
Outline one reason why Avtar might need each of the following types of finance:
Short-term finance:
Long-term finance:
Award 1 mark for each relevant reason for needing short-term/long-term finance (max 1 for each).
Award 1 mark for each relevant reference to this business (max 1 for each).
Points might include:
Short-term finance:
- Pay day-to-day expenses/provide working capital [k] for this private sector business [app]
- Pay wages/salary [k] of his 2 employees [app]
- Purchase inventory [k]
- To prevent cash-flow problem/improve the cash position [k]
Long-term finance:
- Purchase non-current assets or examples [k] for the repair business [app]
- Fund expansion/growth [k] in case he decides not to keep the business small [app]
- Fund takeover of another business [k]
- Develop new products/services [k]
Other appropriate responses should be credited.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- (Car) repair / garage or examples
- 2 workers
- Full-time (employees)
- Private sector business
- Economic recession
- Small business
- Added value
Other appropriate examples can be credited.
5.1. Business finance question 2
[Maximum number: 6]
Amir and Carla are business partners. They own a luxury hotel which operates in a niche market. The business has a short hierarchical structure. Amir and Carla use Herzberg's theory of motivation to keep their 5 employees well motivated. Amir and Carla are considering opening another hotel in a different city. They will need to identify a suitable source of finance if they decide to expand. Secondary market research can be used to help a business decide whether it should expand.
Explain two sources of finance Amir and Carla could use if they decide to expand.
Source 1:
Explanation:
Source 2:
Explanation:
Award 1 mark for each relevant source of finance [max 2].
Award 1 mark for each relevant reference to this business [max 2].
Award 1 mark for each relevant explanation [max 2].
Points might include:
- Retained profits [k] from the hotel [app] as does not need to pay it back [an]
- Bank loans [k] to obtain a large amount of money/varying length of time to repay/quick to arrange [an] for the luxury service [app]
- Own(er) savings [k] from the 2 partners [app] as may be readily accessible/no interest to pay [an]
- Crowdfunding [k] as no interest to pay [an]
Other appropriate responses should be credited.
To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.
The following words are likely to be appropriate for this question:
- (New) hotel or related words such as rooms
- (2) partners/partnership
- Luxury
- Niche market
- Different city
- Market research
Other appropriate examples can be credited.
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