Essay
Unit 2 - Working in business P4
- Module
- Unit 2 - Working in business
- Institution
- OCR
level 3 business extended diploma Unit 2 - Working in business P4
[Show more]
Content preview
Unit 2Task P4
In this assignment, I will be describing the different sources of both internal and external
finance used for financing a selected business. For this task I have used Papa’s chicken.
Credit: Credit is both external and internal factor. Business credit is a risk of external factor,
this is because it depends on what outsiders are willing to loan, and the rates or requirements
lenders want from the business. On the other hand, credit depends on the past decisions the
business has made, what lenders it approaches and its current financial position -- internal
factors.
Advantages:
Take advantage of sales - If you want something on sale but don’t have the cash to
get it, credit allows you to get it now.
Establishes a credit history - Buying something on credit with some creditors (even
when you can afford to pay cash for it) means you have a credit record.
Get something you can’t afford now. If you can’t afford to pay with cash for an
item, using credit allows you to get it now.
In relation to Papa’s chicken; one advantage of a financial internal source is that they
use friends and family in time of need. This is because if the company is running out of
stock and need money to re purchase stock again however do not have the funds to pay
the suppliers, instead they can ask their friends and family for the money. This works to
their advantage because they can be flexible when paying back. Some friends and family
won’t ask for interest. On the other hand if they were to borrow a loan from the bank
they will need to pay with interest and they will have a set date when they should be
paying them back. This puts pressure on the company to pay back the bank as soon as
possible.
Disadvantages:
Overuse of credit leads to a poor credit record. A poor credit record means you
will find it more difficult and more expensive to get future credit.
Reduces future buying power. Future income is tied up in credit payments. If you
use credit, part of everything you earn in the future will go toward what you bought in
the past.
Comparison shopping may be discouraged. If you have credit available, you may be
more likely to buy now rather than shopping around to find the best buy.
It can become a habit and encourages overspending. By simply having a credit
card available, a person is likely to spend more when shopping than when paying cash
for everything. Even if they know they cannot afford to pay back what they have bought
they will carry on using it.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller goretex. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
73918 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now