THE WESTMINSTER SCHOOL, DUBAI

DEPARTMENT OF BUSINESS

SOURCES OF FINANCE

1. Antonio and James run a small business where they hand make men’s

clothes. They have many very loyal customers who are allowed on buy on

credit.

a) Explain why they might seek to improve their cash flow by selling invoices

to a debt factor.

b) Explain one advantage and one disadvantage of using retained profits as

a source of finance.

2. Explain two reasons why a business would apply to the government for a

loan.

3. Outline two situations when it would be advisable to use a short-term source

of finance