Edexcel Business A Level Revision

Banks - Financial institutions that are licenced to the deposits, pay interests,  make loans and act as an intermediary in financial transactions, as well as provide other financial services to their customers. Banks will have departments and employees who specialise in business banking including offering advice on topics such as methods of Finance and business planning. ADVANTAGES • Fixed sum available via loans • Easy to plan for fixed repayments DISADVANTAGES • Often difficult to persuade banks to lend • May not be flexible • Requires interest payments • May require collateral BEST FOR... Established businesses with a credit record.Overdrafts for short term cash flow problems.

Family and friends - Investment from people known to the entrepreneur. May want to help support a business if they have some money. ADVANTAGES • May be flexible repayment terms and conditions. • May offer loans without collateral • May provide interest free or low rate finance DISADVANTAGES • Amount may be limited • May place pressure on relationships • Lenders may lose their money • They may also want to be more involved in the business BEST FOR ... Small businesses running as sole traders or possibly a partner.

External Finance - capital raised from outside the business. Sources of finance - where the finance is coming from e.g. the provider Methods of finance - how the finance is provided. SOURCES OF FINANCE • Family and friends • Banks • Peer - to - peer funding • Business angels • Crowd funding • Other businesses METHODS OF FINANCE • Loans • Share capital • Venture Capital • Overdrafts • Leasing • Trade credit • Grants

Internal Finance - from within the business e.g. retained profit External finance - from outside the business e.g. loans Owner's capital : Personal savings - how much the owner has invested in the business OR the proportion of the business' assets that are owned by the business owner rather than creditors. Assets - Items owned by the business e.g.  stock is a current asset that will stay in the business for less than a year and vehicles are long term assets. Creditors - People who the business owes money to e.g. the bank Retained profit - Profit kept within a business from profit for the year to help finance future activities. Profit that remains after tax bills and dividends have been covered. Sale of assets - the sale of a long term or fixed assets. (NOT CURRENT ASSETS) ADVANTAGES OF OWNERS CAPITAL Do not have to repay No interest charges Owner's maintain control Risking own savings can be motivational  Do not have to go through a

Job empowerment - giving employees the power to do their job. The concept is closely linked to motivation and customer service. Put simply, employees need to feel that their actions count. Empowerment is a catch-all term that covers: Giving authority to make decisions to front-line staff (e.g. hotel receptionist, call centre assistant) Encouraging employee feedback Showing more trust in employees This is a stage beyond delegation, giving employees more control over their working situation. ADVANTAGES Increasing the Productivity and Morale. Those who are given the responsibility to create their own decisions can feel more trusted in which their contributions have a direct factor in the success of the company. This can actually offer them to boost their morale. Bigger Involvement Leading to Bigger Commitment. When employees are given greater involvement by increasing their responsibility, they are able to become more involved in the development of strategies for the organ

Delegation - Where responsibility for carrying out a task or role is passed onto someone else in the business. Delegation involves the assignment to others of the authority for particular functions, tasks, and decisions. Delegation can allow subordinates to gain more autonomy and become empowered leading to an increase in performance The main advantages and disadvantages of delegation can be summarised as follows: Advantages Reduces management stress and workload Allows senior management to focus on key tasks Subordinates are empowered and motivated Better decisions or use of resources (potentially) Good method of on-the-job training  Disadvantages Cannot / should not delegate responsibility Depends on quality / experience of subordinates Harder in a smaller firm May increase workload and stress of subordinates

Consultation - involves discussions between managers and employees covering all aspects of the work. Taking into account the views of employees further down the hierarchy. Encourages a sense of responsibility and gives a chance to review areas of difficulty, can enhance efficiency.           Consultation is the process by which management and employees or their           representatives jointly examine and discuss issues of mutual concern. It          involves seeking acceptable solutions to problems through a genuine          exchange of views and information. Consultation does not remove the           right of managers to manage - they must still make the final decision -          but it does impose an obligation that the views of employees will be         sought and considered before decisions are taken. Indeed, in certain         circumstances consultation with independent recognised trade unions is a          legal requirement. ADVANTAGES OF CONSULTATION