CAIE A-Level Business 5.2 Sources of Finance Question Bank

CAIE A-Level Business 5.2 Sources of Finance Question Bank
Cambridge International AS & A Level Business 9609 syllabus for exams in 2026, 2027 and 20282026–2028

Practise comparing internal and external finance sources and analysing cost, control, flexibility, debt and purpose before recommending a source suited to the business context.

Exam points

  • classify retained profit, asset sales or owner funds as internal and borrowing or equity as external
  • analyse a source through interest, repayment, control, security, flexibility and cash-flow effects
  • recommend finance by matching amount and duration to purpose, debt level and owner priorities

Covered syllabus points

5.2.1—Ownership and finance sources5.2.2—Internal and external finance5.2.3—Finance source factors5.2.4—Selecting finance sources

Question 1(b)(ii)

[Maximum number: 3]

Office Furniture Designs (OFD)

Markus is an entrepreneur and is planning to set up a private limited company called OFD in four weeks' time. OFD will be an online retailer selling office furniture directly to business customers. Products will be sent directly to customers from OFD's warehouse. OFD's product range will include office chairs, desks and filing cabinets.

Markus will have limited start-up funds. OFD will operate in a competitive market and Markus is keen to offer high-quality customer service. He also will have to think carefully about opportunity cost.

As part of his business planning, Markus has prepared a cash flow forecast (see Table 1.1).

Table 1.1 OFD's cash flow forecast June - August 2023 (\$ 000)

Table 1.1 OFD's cash flow forecast June - August 2023 (\$ 000)

Markus plans to offer all customers one month trade credit. However, as OFD is a new business, suppliers may insist on payment on delivery. Markus is currently researching sources of finance to improve OFD's cash flow.

OFD will need five employees who will work in the warehouse and three customer service assistants. Markus plans to offer two weeks of induction training to all employees.

Explain one factor that will influence Markus' choice of a source of finance.

Question 2(b)

[Maximum number: 3]

Explain one external source of finance for a business.

Question 6(b)

[Maximum number: 12]

'A large bank loan is the most appropriate source of finance for the expansion of a furniture retailer.'

Evaluate this view.