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Edexcel IGCSE Business Studies 3.1 business finance sources

Edexcel IGCSE Business Studies 3.1 business finance sources
Edexcel IGCSE Business Studies syllabusBusiness Studies 4BS1First assessment 2019

Practise finance sources by classifying funding as internal or external and matching short-term or long-term sources to business needs.

Exam points

  • Distinguish internal and external sources such as retained profit, loans or overdrafts.
  • Explain a benefit or drawback of a finance source for a given business decision.
  • Evaluate whether a short-term or long-term source matches the business need.

Question 1

[Maximum number: 2]

In 1971 Starbucks opened its first coffee shop in Seattle, Washington, US. Since then, it has experienced significant growth with more than 32,000 stores operating across 80 countries. It sells coffee and food products including cakes, biscuits and sandwiches. Starbucks has a mission 'To inspire and nurture the human spirit - one person, one cup and one neighbourhood at a time.'

Starbucks refers to its employees as 'partners' as they encourage people to support each other and work to achieve common goals. It offers the opportunity for partners to develop their skills and knowledge of the coffee shop market, by starting as baristas, then as coffee masters and finally as coffee shop managers.

Question 1(a)(ii)

(a)

Which one of the following is an external source of finance?

Select one answer.

A

Selling assets

B

Retained profit

C

Personal savings

D

Bank loan

[ 1 ]

Question 1(a)(vi)

(b)

Which one of the following is an external source of finance for managing immediate cash flow problems?

Select one answer.

A

Personal savings

B

Retained profit

C

Selling assets

D

Overdraft

[ 1 ]

Question 1(a)(vi)

[Maximum number: 1]

The first Premier Inn hotel was opened in 1987. Premier Inn now has over 820 hotels in the UK, United Arab Emirates (UAE) and India with over 83,000 rooms. It has recently expanded by opening the first Premier Inn in Germany and has plans to open more in other countries.

The majority of the hotels have restaurants with facilities for guests to buy meals and drinks.

Which one of the following is an internal source of finance for a business?

Select one answer.

A

Crowdfunding

B

Loan capital

C

Personal savings

D

Venture capital

Question 2(e)

[Maximum number: 3]

After a recent increase in customer numbers Four Fitness is considering opening a third gym.

Explain one disadvantage to a small business of borrowing money from a bank.

Question 2

[Maximum number: 6]

Kraft Heinz has different functional areas within the business. These functional areas work together to ensure that Kraft Heinz maintains high standards of production with limited waste material.

Kraft Heinz aims to be involved in the local area through various methods such as charity and sporting events.

Question 2(c)

(a)

Explain one reason why some businesses use crowdfunding as a source of finance.

[ 3 ]

Question 2(d)

(b)

Explain one disadvantage to a business of using retained profits to purchase goods and services.

[ 3 ]

Question 3(a)

[Maximum number: 1]

Starbucks continues to increase the number of coffee shops it is opening throughout the world.

Define the term crowdfunding.

Question 3(a)

[Maximum number: 1]

Define the term share capital.

Question 4(b)

[Maximum number: 6]

Jimmy Choo has many shops around the world.

Figure 2 shows the number of Jimmy Choo shops in some locations.

Figure 2

Figure 2

Analyse the benefit to Jimmy Choo of using share capital to fund its growth.