btec business finance assignement 1 p1,p2,p3 PDF

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Summary

business finance exam of btec for assignement 1 which includes a qualification of a distinction of the criterias....

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Report on different sources of finance and revenue That are available to different businesses Btec level 3 extended diploma

By daddy paulin Kameca (Registration number N 953747) 10th May, 2021

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Acknowledgement

First and foremost Glory be to God for giving for giving me the energy, health and resources to pursue my studies and write this report. I am greatly indebted and thankful to my teacher, TR. bayingana who tirelessly advised, guided and encouraged me even when in times when 1 seemed stuck. Finally I take this opportunity to thank my workmate, karenzi divin and my friends for the encouragement throughout the period I was conducting this research. I heavily thank my parents, for being my very first teachers and showing me how good education is. Thank you very much and God bless you.

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Table of content

Executive summary....................................................................................................................................4 Introduction................................................................................................................................................4 P1: explain sources and suitability of finance available in different business contexts.....................4 Internal sources of finance.................................................................................................................5 External sources of finance................................................................................................................6 P2: explain sources and suitability of revenue available in a specific business context.....................7 Selling activities..................................................................................................................................7 Supplementary activities....................................................................................................................8 M1: analyze the types of business finance required in a specific business context............................8 Small businesses...................................................................................................................................8 Large and medium businesses..............................................................................................................9 D1: evaluate appropriate types of business finance applicable in a specific business context..........9 Internal sources of finance.................................................................................................................9 External sources of finance..............................................................................................................10 Conclusion.................................................................................................................................................10 Reference list.............................................................................................................................................10

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Executive summary In this report we have discussed the full analysis of the features of different sources of finance and revenues where we saw how they can be accessed through different ways, also we discussed about their advantages and disadvantages they have towards the businesses there are being used. Also we explained how different sources of finance meet the requirements and needs of different businesses and lastly we did a conclusion on the appropriate types of business finance for the different businesses at different stages of their development which included from the growth to the decline stage. Introduction In this report we will talk about the different features, advantages, disadvantages, accessibility of business finance and revenues and how they meet the needs and requirements of different types of businesses at every stage of their development which will endorse us on how each type of business finance can lead to the success of a business. This report was written on a basic of getting knowledge about the types of business finance and revenues, it was written in a time limit of a week due to the deadline given.

P1: explain sources and suitability of finance available in different business contexts First of all, internal sources of finance is money that comes from inside the business which we may say like owners capital, retained profits and selling assets while external sources of finance is money that comes from outside the business including family and friends, bank loan, overdraft, venture and leasing and below explained with the suitable businesses. -

Owner’s capital: it refers to the money invested by the owner of a business. This often comes from their personal savings. This source of finance is suitable to the small business where it does not require a lot of money.

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Retained profits: it when a business makes a profit, it can leave some or all of this money in the business and reinvest it in order to expand. This source of finance is suitable to all kind of businesses because they can invest more into the expansion of their businesses using the profits that they retained.

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Selling assets: this one involves selling products owned by the business, this may be used when either a business no longer has a use for the product or they need to raise

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money quickly. This one is suitable to large and medium businesses because they have expensive assets and they may be having a lot of value when in need of money. -

Family and friends: businesses can obtain a loan or be given money from family and friends that may not need to be paid back or are paid with little or no interest charges. This is suitable to evolving businesses which want finance to invest in their business or operations.

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Bank loan: it is money borrowed from a bank by an individual or business; it is paid off with interest over an agreed period of time often over several years. This source of finance is suitable for large businesses because they have some history with they will know that they will pay them back.

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Overdraft: it is when a business or person uses more money than they have in a bank account. This means that it is in the minus figures. I believe that this source of finance is suitable also for large businesses and also for medium businesses because they are the ones to use the money for also generating profits to also pay back the bank for the money they owe.

P2: explain sources and suitability of revenue available in a specific business context Sources of revenues are the various roots from which a business earns money from the sale of goods or the provision of services and many others and there suitability can vary according to the type of source of revenue, and below explained points about it. Selling activities Cash sales As one of the sources of revenue to the business, cash sales is when you purchase goods and you pay immediately and is one of the suitable source of revenue for all the businesses because it makes money flow directly into the business which helps to fund day by day operations of the business. Credit sales This is when you purchase a good or service and you agree to pay later, but despite other sources this one is suitable for medium and large businesses because there may be some delay in the payment of the credits which may delay the operations a business may be having e.g. like buying tools needed by the business to produce the products of a business and because they may be having where to get other revenues from despite small businesses. Supplementary activities 5|Page

Rental income Rental income is the money got from rents, it may differ according to the cost of the places on rent, even though a business may be generating income from rents, this is suitable for businesses which have buildings, and we may talk about large businesses which have many sources of revenue like infinix which has building all over the town of Kigali. Interest payment on deposits This one also may be a good source of revenue because anytime you deposit money on the fixed account of the company there will be always an interest given to you by the bank which can be used to fund the operations of the business. This one can be suitable for all the businesses because every business should have a fixed account. Commission received It is a sum of money paid to a business or someone upon completion of a task, usually selling a certain amount of goods or services. This one may be suitable for companies which give those services like real estate’s companies which give commissions on finding houses which may get revenues from that service given. M1: analyze the types of business finance required in a specific business context We may categorize the businesses into small, medium and large businesses were we will make an analysis on the types of business finance they are required and suitable to get. Small and medium businesses Because of the similarities they have in common I have put them together. The access that small and medium businesses have to financing is different from large businesses. If we look at investor perspective, research suggests that small businesses fail at a higher rate than big businesses, thus default risk is also high. This is the reason that small businesses have less access to credit than larger companies because lending to a small business is riskier and more expensive than lending to larger companies. Additionally, evaluating small companies is difficult and not very cost effective as its data is not as easily accessible as large companies. In spite of all the hurdles, there are many financing options available to small companies. We may talk about like family and friends were they can get money from them to finance their business and most of the time you don’t need to pay them back or pay them little, also you can use your own capital or savings you have collected over the years while working, this also can help you to finance the operations of the business. Lastly you may get a small business loan or personal loan which can be used for financing the business. 6|Page

Large businesses The financing requirements of a large business may cover the management of short-term cash flow, restructuring short-term and long-term debt, adjusting the overall capital structure between debt and equity, renewing expiring finance facilities, financing major items of equipment or the growth of the business via debt or new equity, including possible listing on a stock market. And this may be done by the acquirement of the different source of finance. Some of the large businesses may use bank loans, because Bank loans are frequently used to finance larger, long-term purchases. They are generally a quick and straightforward way to secure the funding needed, and are usually provided over a fixed period of time. And also because large businesses have a good reputation of paying their and their financial documents are used. Also there can be use of overdrafts are often used to ease pressures on working capital and as a back-up for unexpected expenditures. They are a form of finance for businesses that experience fluctuations in working capital and also competition. This can be used because some banks are assured that the businesses will pay back with interest which most of the sme’s are not usual to. Lastly, they can sell their assets because most of the times large companies have expensive assets which can be used as a source of finance while in an urgent situation. D1: evaluate appropriate types of business finance applicable in a specific business context The types of internal and external finance have the way they meet the needs and wants of the different businesses which may include small, medium and large businesses, so below the explanation. Internal sources of finance Retained profits When profits are retained in the business they are added on the business finance it is saved up and is used to carry out different business activities that are essential to the business for example the production process which will increase the products sold by the business. This is usually effective in large businesses which most of the times have high profits which then can keep some of the profits for future use. But also sme’s (small and medium sized businesses) which can also use the profits that they have made. Selling assets The sale of assets can help to meet the needs of large and medium businesses because assets like buildings. Land and also machinery usually generate 7|Page

a large sum of money that can be used to meet the different needs of the business like paying the rent of the offices or leased materials used by the company. External sources of finance Bank loans Bank loans help to meet the needs of business because banks usually offer loans of huge amount and it is this money that will be used to settle some of the business needs like this money can be used to buy advanced equipment that is going to help the business produce of better quality and to pay long term debts of the business. This is suitable for large and medium businesses because they usually have got loans before and the banks know that they can trust them instead of the small businesses which they don’t know even their financial status. Family and friends Family and friend also help to meet business needs because some people have rich family that can offer a large sum of money that can be used to solve some of the needs of the business for example purchasing the advanced machinery which will be used to manufacture high quality goods. This is suitable to small businesses which need money for startup.

Conclusion

I conclude by saying that the different types of business finance and the revenues have an impact towards the different businesses around where they have their advantage and disadvantage on the daily operations of any business and lastly I would like to encourage businesses to choose the type of business finance according to the situation there are facing.

Reference list -

Trisha, (2017) Retained Earnings: Meaning, Features, Advantages and Disadvantages, .

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Internal Sources of Finance, (2009) .

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Characteristics of Bank Loan, . 8|Page

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Dhaval, s, (2018) Venture Capital: Meaning, Features and Restrictions, .

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Anne m, (2017) 7 Tips to Secure Financing for Your Small Business, .

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Steve M, (2010) Internal Sources of Finance That a Firm can utilize, .

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