Business finance: needs and sources
Cambridge IGCSE Business Studies (0450) · Unit 5: Financial information and decisions · 10 flashcards
Business finance: needs and sources is topic 5.1 in the Cambridge IGCSE Business Studies (0450) syllabus , positioned in Unit 5 — Financial information and decisions , alongside Cash flow forecasting, Income statements and Statement of financial position. In one line: Start-up capital is the initial funding required to launch a new business. This finance covers costs like purchasing equipment, renting premises, and initial marketing efforts.
This topic is examined in Paper 1 (short-answer questions, built around a pre-released case study) and Paper 2 (extended case-study analysis).
The deck below contains 10 flashcards — 7 definitions and 3 key concepts — covering the precise wording mark schemes reward. Use the 7 definition cards to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.
'start-up capital' and give an example of how it's used
Start-up capital is the initial funding required to launch a new business. This finance covers costs like purchasing equipment, renting premises, and initial marketing efforts.
Questions this Business finance: needs and sources deck will help you answer
- › What are 'retained profits,' and how can they be used as a source of finance?
- › Describe 'sale of assets' as a source of finance. Give one advantage and one disadvantage.
- › Explain the difference between short-term and long-term finance, providing an example of each.
Define 'start-up capital' and give an example of how it's used.
Start-up capital is the initial funding required to launch a new business. This finance covers costs like purchasing equipment, renting premises, and initial marketing efforts.
Explain the difference between internal and external sources of finance, giving an example of each.
Internal finance comes from within the business, such as retained profits used to buy new equipment. External finance is sourced from outside the business, for instance, a bank loan taken to expand operations.
What are 'retained profits,' and how can they be used as a source of finance?
Retained profits are the profits a business keeps after paying taxes and dividends. They can be reinvested in the business for expansion, research and development, or to purchase new assets, providing a cost-effective source of finance.
Describe 'sale of assets' as a source of finance. Give one advantage and one disadvantage.
Selling assets involves selling possessions of the business to raise capital. An advantage is that it can quickly generate cash. A disadvantage is that the business loses the use of the asset, potentially impacting productivity.
What is a 'bank overdraft,' and when might a business use it?
A bank overdraft allows a business to withdraw more money than it has in its account, up to an agreed limit. Businesses often use overdrafts to cover short-term cash flow problems or unexpected expenses, like delayed payments from customers.
Explain 'trade credit' and how it benefits a business's cash flow.
Trade credit allows a business to buy goods or services from a supplier and pay for them later, usually within 30-90 days. This improves cash flow by delaying payments and giving the business time to generate revenue from the purchased items before needing to pay for them.
What is 'share capital,' and how do companies obtain it?
Share capital is the money raised by a company through selling shares to investors. Companies obtain it by issuing new shares on the stock market (for public limited companies) or privately to investors (for private limited companies).
Describe 'venture capital' and the type of businesses that typically use it.
Venture capital is funding provided to start-up companies and small businesses with high growth potential. These businesses often operate in industries such as technology, biotechnology, or other innovative fields, and seek venture capital for rapid expansion.
Explain the difference between short-term and long-term finance, providing an example of each.
Short-term finance is used for immediate needs and is typically repaid within a year, like a bank overdraft for managing working capital. Long-term finance is used for investments like purchasing buildings and is repaid over several years, such as a mortgage.
What is 'crowdfunding,' and what are some of the potential benefits and drawbacks for a business?
Crowdfunding involves raising finance by collecting small amounts of money from a large number of people, typically online. A benefit is access to a wide range of investors, while a drawback can be the need to publicly disclose business plans.
Key Questions: Business finance: needs and sources
Define 'start-up capital' and give an example of how it's used.
Start-up capital is the initial funding required to launch a new business. This finance covers costs like purchasing equipment, renting premises, and initial marketing efforts.
Explain the difference between internal and external sources of finance, giving an example of each.
Internal finance comes from within the business, such as retained profits used to buy new equipment. External finance is sourced from outside the business, for instance, a bank loan taken to expand operations.
What is a 'bank overdraft,' and when might a business use it?
A bank overdraft allows a business to withdraw more money than it has in its account, up to an agreed limit. Businesses often use overdrafts to cover short-term cash flow problems or unexpected expenses, like delayed payments from customers.
Explain 'trade credit' and how it benefits a business's cash flow.
Trade credit allows a business to buy goods or services from a supplier and pay for them later, usually within 30-90 days. This improves cash flow by delaying payments and giving the business time to generate revenue from the purchased items before needing to pay for them.
What is 'share capital,' and how do companies obtain it?
Share capital is the money raised by a company through selling shares to investors. Companies obtain it by issuing new shares on the stock market (for public limited companies) or privately to investors (for private limited companies).
More topics in Unit 5 — Financial information and decisions
Business finance: needs and sources sits alongside these Business Studies decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.
Cambridge syllabus keywords to use in your answers
These are the official Cambridge 0450 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.
Key terms covered in this Business finance: needs and sources deck
Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.
How to study this Business finance: needs and sources deck
Start in Study Mode, attempt each card before flipping, then rate Hard, Okay or Easy. Cards you rate Hard come back within a day; cards you rate Easy push out to weeks. Your progress is saved in your browser, so come back daily for 5–10 minute reviews until every card reads Mastered.
Study Mode
Space to flip • ←→ to navigate • Esc to close
You're on a roll!
You've viewed 10 topics today
Create a free account to unlock unlimited access to all revision notes, flashcards, and study materials.
You're all set!
Enjoy unlimited access to all study materials.
Something went wrong. Please try again.
What you'll get:
- Unlimited revision notes & flashcards
- Track your study progress
- No spam, just study updates