U2A3 P4
Unit 2 Assignment 3
T-SHIRTS TO GO are interested in expanding their range of products and need to invest a total
of £55,000 - £20,000 in new machinery, £10,000 in new stock, as well as £25,000 in an
extension of their premises. In order to invest this money they need to be able to source the
finances, which can be done through external and internal sources.
Sales of assets (internal)
Sales of assets is selling an unused assert of the business, for example a machine or vehicle.
T-SHIRTS TO GO could sell off any assets than they are not using, for example old machinery
they no longer use, or some of their current machinery if they are going to buy all new
machinery. The benefits of selling assets is it gets you money for things you are no longer using
anyway, however you may not get as much as you hope for when selling off assets and it is only
suitable if T-SHIRTS TO GO have assets they not longer need or won't be needing in the near
future. Selling assets may not always be easy or quick to do, especially if they don't want to
lower the price too much. This could be a good way for T-SHIRTS TO GO to raise a smaller
amount of money, such as the £10,000 needed for new stock, because they are not likely to
have too many assets they are able to sell.
Retained Profits (internal)
Retained profits are the profits a business has from selling goods or services that are kept in
the business rather than paid out a a dividend. T-SHIRTS TO GO could reinvest their profit into
the business in order to expand, this is a good long term solution as there is no interest and no
need to pay money back, however the owners will get reduced dividends and this source of
finance is only possible if T-SHIRTS TO GO have enough profits currently. This could be a good
way for T-SHIRTS TO GO to invest the £10,000 needed for new stock, because they are a
smaller business they are unlikely to have a large amount of retained profits.
Loans (external)
A loan is where someone borrows money from a financial institution, such as the bank, the
main type of loan is either a personal or business loan, the latter requires a business plan so
they are able to see if the investment would be safe and that the business has a good plan to
spend the money on. This could be a good option for T-SHIRTS TO GO because once agreed
they are easy to plan and are usually long term arrangements, which would give T-SHIRTS TO
GO time to expand and make money to be able to pay back the loan. It is suitable for borrowing
larger amounts of money, but the loan may have to be insured against assets, which could be a
problem. Loans can have other disadvantages, T-SHIRTS TO GO will have to pay back the full
amount plus interest which can build up over time. A loan could be a good way for T-SHIRTS
TO GO to get a larger amount of money such as the £25,000 needed for an extension of their
premises because loans are usually able to be taken out for larger amounts of money.
Crowdfunding (external)
