Give one advantage and one disadvantage of an overdraft.

An overdraft is flexible, since the business borrows only what it needs when it needs it. The interest rate is high and the bank can demand repayment at short notice.

What is trade credit?

Trade credit is when a supplier lets a business buy goods now and pay later, often within 30 to 60 days. The business can sell the stock before paying for it.

Why might a new business find it hard to get trade credit?

Suppliers want proof that a business will pay on time. A new business has no trading history, so suppliers may insist on payment upfront.

Edexcel GCSE Business 1BS0

Enterprise and Entrepreneurship

Topic overview The dynamic nature of business Risk and reward The role of business enterprise

Spotting a Business Opportunity

Topic overview Customer needs Purpose and methods of market research Market research data and its reliability Market segmentation The competitive environment

Putting a Business Idea Into Practice

Topic overview Business aims and objectives Business revenues, costs and profits Cash and cash flow Sources of business finance

Making the Business Effective

Topic overview Business ownership and limited liability Franchising as a start-up option Business location The marketing mix Business plans

Understanding External Influences on Business

Topic overview Business stakeholders Technology and business Legislation and business The economy and business Responding to external influences

Growing the Business

Topic overview Organic and inorganic business growth Public limited companies and finance for growth Changes in business aims and objectives Business and globalisation Ethics, the environment and business

Making Marketing Decisions

Topic overview Product design, life cycle and differentiation Price and pricing strategies Promotion strategies and technology Place and methods of distribution Using the marketing mix to make business decisions

Making Operational Decisions

Topic overview Business operations and production processes Working with suppliers Managing quality The sales process

Making Financial Decisions

Topic overview Profit, profit margins and ARR Understanding business performance

Making Human Resource Decisions

Topic overview Organisational structures and communication Different ways of working Effective recruitment Effective training and development Motivation in the workplace

Putting a Business Idea Into Practice

Sources of business finance

3 things to know
Paper 1

Overview

Short and long-term finance, overdrafts, trade credit, personal savings, venture capital, share capital, bank loans, retained profit and crowd funding, with interest calculated as a percentage.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

What are the benefits and drawbacks of personal savings as a source of finance?

Key term

What is the difference between short-term and long-term finance?

Key term

What is an overdraft?

Questions from this subtopic

Each one with the model answer underneath.

1
What is the difference between short-term and long-term finance?
Model answer
Short-term finance is repaid within a year and covers day-to-day cash needs. Long-term finance is repaid over more than a year and pays for major investments.
2
What is an overdraft?
Model answer
An overdraft lets a business take more money out of its bank account than it holds, up to an agreed limit. Interest is charged on the amount overdrawn.
3
Give one advantage and one disadvantage of an overdraft.
Model answer
An overdraft is flexible, since the business borrows only what it needs when it needs it. The interest rate is high and the bank can demand repayment at short notice.
4
What is trade credit?
Model answer
Trade credit is when a supplier lets a business buy goods now and pay later, often within 30 to 60 days. The business can sell the stock before paying for it.
5
Why might a new business find it hard to get trade credit?
Model answer
Suppliers want proof that a business will pay on time. A new business has no trading history, so suppliers may insist on payment upfront.
6
What are the benefits and drawbacks of personal savings as a source of finance?
Model answer
Personal savings are the owner's own money put into the business. The owner pays no interest and keeps full control. The owner may lose the savings if the business fails.

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Enterprise and Entrepreneurship

Spotting a Business Opportunity

Putting a Business Idea Into Practice

Making the Business Effective

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Revenue = price × .

quantitycostprofit

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AGoods must be of satisfactory quality.

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Cash inflows means money coming into a business.

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