This section of my summarised notes covers the topic 'Finance and Accounting' in CIE 9609 Business Studies.
These are simple, stylised note pack which are perfect for AS business studies revision. They cover all the topics in the CIE syllabus with needed detail to ensure you get the perfect scor...
Finance
Capital Expenditure: purchase of assets that are expected to last for more than one year ex.
buildings and machinery
Revenue Expenditure: spending on all costs and assets other than fixed assets ex. Wages, raw
materials
Internal Sources of Finance
Type Features Advantages Disadvantages
Personal • Money invested into the • Quick and easy • Not for PLCs and LTDs
Capital business by the owner
Retained • Using profit form previous • Quick and easy • Cannot be retrieved
Earnings year • No interest • Opportunity cost
• Opportunity cost: no dividend • Unsatisfied shareholders
Sales of • Selling redundant assets • Sell off obsolete assets • Asset may be needed
Assets e.g. premises/machinery • Reduce waste • No longer owned
• Medium term • Depreciation
• Can use sale and lease back • Is it sellable
Sales and • Selling any asset then • Available quickly • Won’t get true asset value -
lease back renting it back • No interest reduces capital employed
of assets • Can still use asset • Mostly payments can be
• No maintenance costs expensive
External Sources of Finance
Type Features Advantages Disadvantages
Grants • Non repayable from the • No interest • Hard to get
government • Won’t be able to change
• For location, recruitment,
regeneration, etc.
Loan • Repayable from bank • Large amount • Interest
Capital • Will demand collateral to • Long term
provide security in case
Mortgage • A form of commercial loan secured against a specific property asset. May or may not be a
fixed rate of interests. A and D ↑
Debentures • Bonds issued by firm with • Relatively quick to arrange if • Commit to regular interest
fixed interest rate collateral is sufficient payment - not ideal for bad
• Very long term • Long term cash flow
• No collateral required - trust • interest
of big company needed
Share • Investors acquire shares • No interest • Slow and expensive
Capital • In PLCs and LTDs • Profit utilisation • Difficult when price declines
• Large • Dilutes control - takeover
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