CIE IGCSE Topical Past Paper 1

5.1 Business finance: needs and sources

0450/13/O/N/2024

Ramon is an entrepreneur. He plans to start up a home tutoring service to provide students with extra help to learn maths. Ramon is considering buying a franchise. He has prepared a business plan but is concerned about how an increase in the rate of inflation might affect his business. Ramon wants to know whether crowdfunding is the best source of finance for a start-up business to use.

Do you think crowdfunding is the best source of finance for a start-up business to use? Justify your answer.

0450/12/M/J/2024

Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar’s business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business.

(c) Outline one reason why Avtar might need each of the following types of finance: [4]
Short-term finance:
Long-term finance:

0450/11/O/N/2024

Mitchell is an entrepreneur. He wants to start up a business selling books. As part of his business plan Mitchell has carried out some market research. An extract is shown in Fig. 2.1. Mitchell will use microfinance as a source of finance. He wants to know whether the opportunities of using ecommerce for a new business are greater than the threats.

(c) Outline one advantage and one disadvantage to Mitchell of using microfinance as a source of finance. [4]
Advantage:
Disadvantage:

0450/12/M/J/2024

IDT manufactures clothes for the mass market. It is a multinational company with factories in 4 countries. IDT has short-term and long-term financial needs. The Finance Director is analysing IDT’s statement of financial position. An extract is shown in Table 3.1. He has been asked to calculate working capital and to explain how an increase in non-current liabilities might affect IDT.

Extract from IDT’s statement of financial position ($ million)
	2022	2023
Current assets	380	420
Current liabilities	250	280
Non-current liabilities	300	400

Table 3.1

0450/12/M/J/2024

AH is an insurance business. It operates in a competitive market. AH has 1000 employees including 50 supervisors. The supervisors use an autocratic leadership style. AH currently has a 5% market share and is planning to take over a competitor. The Managing Director is considering how to communicate with AH’s employees about the takeover. There are many sources of finance available to fund business growth.

(e) Explain two sources of finance which could be used to fund business growth. Which source of finance would be the best to use? Justify your answer. [6]

0450/11/O/N/2023

Desmond wants to be a successful entrepreneur. He has decided to leave his office job to start up a gardening business cutting grass and planting flowers. It will be an unincorporated business. Desmond is aware that a new business is at greater risk of failure than an established business.
He has identified his business objectives for the first year. Desmond has calculated he will need $750 for his start-up capital.

(e) Do you think owner’s savings are the most suitable source of finance for a start-up business? Justify your answer. [6]

0450/12/O/N/2023

Paolo wants to start up a business making cakes. He plans to sell all of his products to a wholesaler. Paolo knows the packaging for his products will be important. He has prepared some financial and sales data. An extract from this data is shown in Table 1.1. Paolo is considering using crowdfunding as a source of finance. He knows the business will also need working capital.

Extract from Paolo’s financial and sales data
Average price per cake	$6
Average cost per cake	$4
Forecast average number of cake sales per day	50

Table 1.1

(a) Define ‘working capital’. [2]

(d) Explain one advantage and one disadvantage to Paolo’s business of using crowdfunding asa source of finance. [6]
Advantage:
Explanation:

Disadvantage:
Explanation: