Understanding Sources of Finance for Business Expansion and Survival

The video discusses the financial needs of businesses at different stages, including initial investment, growth, and survival during economic downturns. It explains internal and external sources of finance, such as retained profits, loans, and crowdfunding. The video also compares the benefits and risks of these finance sources, emphasizing the importance of understanding their nuances for business expansion.

Why might a business need finance during an economic downturn?

• To cover cash flow problems and avoid bankruptcy

• To pay for marketing campaigns

• To invest in new technology

• To expand into new markets

What is the most common form of internal finance?

• Debt factoring

• Retained profits

• Crowdfunding

• Trade credit

How do retained profits benefit a company?

• They increase shareholder dividends

• They allow for immediate expansion

• They provide a buffer for future downturns

• They eliminate the need for external investors

Which of the following is an example of a short-term external source of finance?

• Share capital

• Retained profits

• Leasing

• Overdrafts

What is a potential risk of using external sources of finance?

• Increased control over the company

• Dilution of company ownership

• Immediate repayment of funds

• Guaranteed profit increase