Finance - Business Studies

Q: What is a source of finance?

A: A source of finance can be different methods a company uses to earn money, for example, a bank loan or a government grant.

Q: What is a Bank Loan?

A: Bank loans are when a company or a person borrows money from the bank, and they pay it back through interest or instalments.

Q: One advantage of a Bank Loan

A: One advantage of a bank loan is that you can easily pay it back gradually, without paying a huge sum of money upfront.

Q: One disadvantage of a Bank Loan

A: One disadvantage of a bank loan is that you might end up paying more than you borrowed, because of interest.

Q: What is Retained Profit?

A: A retained profit is the earnings the business keeps after the after giving dividends to the shareholders.

Q: One advantage of Retained Profit

A: One advantage of a retained profit is that it doesn’t need to be repaid with interest or anything, it’s very useful for future upgrades.

Q: One disadvantage of Retained Profit

A: One disadvantage is that it can take a long time for the profits to build up if you’re planning to use it for short-term use.

Q: What is a Government Grant?

A: A government grant is usually a fixed amount of money that the government gives money to a business (most likely small businesses) free of charge, but the business needs to meet certain requirements.

Q: One advantage of a Government Grant

A: One advantage of a government grant is that you do not need to pay back the government, as it is just awarded to you.

Q: One disadvantage of a Government Grant

A: One disadvantage of a government grant there are low chances of getting it, as there are a lot of applicants, making it very highly competitive.