DISCUSSION QUESTION

Top Sounds is a dance club that wants to keep up to date by installing video monitors
throughout the premises. They are not sure which monitors they should buy because
technology is advancing so quickly. At the moment, they only have one projector and a
large projection screen. Both are old-fashioned. Business has been quiet lately so they
don't have much working capital.  Give one possible internal source of finance and one
possible external source of finance that Top Sounds could use, explaining your reasons.  

The Answer
Conrad wrote: One internal source of finance that Top Sounds is to sell the
projector and screen. As an external source of finance they could lease the
video monitors.  
Examiner's Note
Conrad's answer was very basic. He has made good decisions but has given
no reasons. This answer would probably get an 'E' grade.  
The Answer
Nona wrote: Top Sounds have to make sure they do not use up all their
working capital. One internal source of finance that they could use is to sell
some assets. The projector and screen are going to be replaced by the video
monitors, so could be sold. As they don't have much cash they may also
need external financing to get the video monitors. Leasing them would be a
cheaper option at the moment than buying them for cash.  
Examiner's Note
Nona's answer showed she understood the subject and her explanations were
good. She could have given more detail and used business terms. This
answer would probably get a 'C' grade.  
The Answer
Pete wrote: Top Sounds have to make sure they have liquidity by not using
up all their working capital. One internal source of finance that they could
use is to sell some assets. The projector and screen are old-fashioned and are
going to be replaced by the video monitors so will not be needed anymore
and could be sold. One external source of finance they could use is leasing
the video monitors. This would be a cheaper short-term option than buying
them for cash and safer as they are not sure which monitors they should get.
It would be easier to change them if they were not happy with them and to
update them when new models come along. Another alternative might be to
use hire purchase which would mean initially smaller expenditure but in
the long term will cost more than the original price.  
Examiner's Note
Pete's answer was very detailed, and gave good explanations. He showed
that he understood the subject very well and used the correct business terms
like working capital and assets. This answer would probably get an 'A'
grade.  
Remember  
You will gain extra marks if you show you can use business terms correctly
in your answers.