IGCSE/ A-Level Revision Questions

Two suitable sources of finance for this company are share capital and a mortgage. Here's a comparison of their advantages and disadvantages:

Source of Finance	Advantages	Disadvantages
Share Capital	No repayment required. Strengthens the company's balance sheet. Can bring in valuable expertise and connections.	Dilutes ownership for existing shareholders. Can be time-consuming and expensive to issue shares. Potential for disagreements between shareholders.
Mortgage	Retained earnings are not affected. Interest is tax-deductible. Provides a large sum of money.	Requires security (e.g., the delivery van itself). Repayments are fixed and can be a significant financial burden. Can be difficult to obtain if the company has a poor credit history.

Share capital is suitable if the company is willing to share ownership and believes that new shareholders can contribute to its growth. However, it dilutes existing ownership. A mortgage is a good option if the company has assets to secure the loan and can afford the regular repayments. It avoids diluting ownership but creates a financial obligation.

Business Studies – 5.1.2 The main sources of finance | e-Consult

5.1.2 The main sources of finance (1 questions)

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