IB Business Management Topic 3.2.3 Internal Vs. External Sources and Implications Revision Notes (SL/HL)

IB Business Management Topic 3.2.3 Internal Vs. External Sources and Implications Revision Notes (SL/HL) | RevisionDojo

Written by official IB examiners

Choosing the Most Suitable Source of Finance

No single source of finance fits all circumstances.
Businesses need to evaluate various factors to determine which source or combination of sources is best suited to their needs.
Below are the key considerations for selecting the appropriate source of finance:

1. Expected Timescales

Short-term finance is used to cover immediate needs, such as paying bills or funding operating expenses.
Consider sources like overdrafts and trade credit, typically required for revenue expenditure lasting less than a year.
Long-term finance is needed for significant investments like purchasing property or vehicles.
Consider sources like loan capital or share capital, which fund capital expenditure that spans many years.

Tip

Match the source to the need.
For short-term issues (e.g., cash flow problems), avoid using long-term options like mortgages, they are inflexible and costly over time.

2. The Firm's Legal Structure

A business’s legal form directly affects its access to finance.
Sole traders and partnerships often rely on personal funds, overdrafts, or microfinance, as they are perceived as riskier by external investors and may lack internal funds.
Private limited companies can use shareholder investments, loan capital, or venture capital, but must consider shareholder approval for share issues.
Public companies benefit from raising funds via stock exchanges through public share issues or rights issues.

Nice try, unfortunately this paywall isn't as easy to bypass as you think. Want to help devleop the site? Join the team at https://revisiondojo.com/join-us. exercitation voluptate cillum ullamco excepteur sint officia do tempor Lorem irure minim Lorem elit id voluptate reprehenderit voluptate laboris in nostrud qui non Lorem nostrud laborum culpa sit occaecat reprehenderit

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Duis aute irure dolor in reprehenderit

Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione voluptatem sequi nesciunt. Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit.

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

Unlock the rest of this chapter with a free account

Choosing the Most Suitable Source of Finance

No single source of finance fits all circumstances.
Businesses need to evaluate various factors to determine which source or combination of sources is best suited to their needs.
Below are the key considerations for selecting the appropriate source of finance:

1. Expected Timescales

Short-term finance is used to cover immediate needs, such as paying bills or funding operating expenses.
Consider sources like overdrafts and trade credit, typically required for revenue expenditure lasting less than a year.
Long-term finance is needed for significant investments like purchasing property or vehicles.
Consider sources like loan capital or share capital, which fund capital expenditure that spans many years.

Tip

Match the source to the need.
For short-term issues (e.g., cash flow problems), avoid using long-term options like mortgages, they are inflexible and costly over time.

2. The Firm's Legal Structure

A business’s legal form directly affects its access to finance.
Sole traders and partnerships often rely on personal funds, overdrafts, or microfinance, as they are perceived as riskier by external investors and may lack internal funds.
Private limited companies can use shareholder investments, loan capital, or venture capital, but must consider shareholder approval for share issues.
Public companies benefit from raising funds via stock exchanges through public share issues or rights issues.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

IB Business Management 3.2.3 Internal Vs. External Sources and Implications Notes

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

Choosing the Most Suitable Source of Finance

1. Expected Timescales

2. The Firm's Legal Structure

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

Choosing the Most Suitable Source of Finance

1. Expected Timescales

2. The Firm's Legal Structure

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account