Sources of finance for growing and established businesses: ● internal sources: retained profit, selling assets ● external sources: loan capital, share capital, including stock market flotation (public limited companies).
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Demonstrate Question
This question is a Justify question. You will be presented with a case study and a question that asks you to choose between two option. You will need to focus on the best option in your opinion and you MUST use the BLT format. Your answer should give one advantage to the option you have chosen with a BLT. This is then followed by a disadvantage of the same option with BLT. Finally you must have a conclusion that explains why you went for the option you did and what it will depend upon to succeed. An example is below for a different Justify question. The structure of your answer should match the example.
In order to increase the number of desserts that can be produced to meet the extra demand, Last Course Patisserie is considering two options:
Option 1: investing in new machinery Option 2: employing more staff.
Justify which one of these two options Last Course Patisserie should choose. (9 marks).
One advantage of employing more staff allows Last Course Patisserie to continue using existing production methods because a USP of the business is that it makes handmade desserts. This leads the quality of the products being maintained and therefore allowing them to have added value to products which can be reflected in its prices
One disadvantage is that even with increased staff it may still not be able to keep up with demand because their is a limit to how productive staff can be making hand made desserts. This could lead to not being able to meet consumer demand and therefore leading to a reduction in reputation.
To conclude I think that employing more staff is the best option as the business is relocating to a larger premises where they can accommodate more staff and increase production whilst keeping the hand made USP. This option depends upon keeping up with customer demand otherwise it may become inevitable that machinery will need to be brought in to the business
Have a go at your own
In order to raise the £1.2 million of extra finance needed, Mind Candy considered two options:
Option 1: retained profit
Option 2: share capital.
Justify which one of these two options Mind Candy should choose.
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