BTEC BUSINESS, LEARNING AIM D -
ADVANTAGES AND DISADVANTAGES
QUESTIONS AND ANSWERS WITH
SOLUTIONS 2024
Two Advantages of Retained Profit - ANSWER 1. No interest charges.
2. Only available up to the amount already accumulated by the business to avoid debts.
Two Disadvantages of Retained Profit - ANSWER 1. Amount available may be limited.
2. Reduces payments to shareholders which may cause dissatisfaction.
Two Advantages of Net Current Assets - ANSWER 1. Encourages the business to manage cash flow
effectively.
2. Can fund day-to-day expenditure.
Disadvantage of Net Current Assets - ANSWER 1. Can put pressure on customers as shorter credit terms
are offered and this negatively affects relationships with suppliers if longer credit terms are negotiated.
Two Advantages of Sale Of Assets - ANSWER 1. No interest charges
2. Reduces capital tied up in assets, releasing it for other purposes.
Two Disadvantages of Sale Of Assets - ANSWER 1. It is likely that the amount received is not a true
reflection of the value of the asset.
2. Can increase costs in the long run if an asset needs to be leased back.
Two Advantages of Owners Capital - ANSWER 1. No interest payments or need to repay.
2. High level of commitment from the owner.
Two Disadvantages of Owners Capital - ANSWER 1. Amount available is likely to be limited.
2. If there is more than one owner this could cause friction if not everyone is able to contribute the same
amount.
Two Advantages of Loans - ANSWER 1. Regular pre-agreed repayments make planning and budgeting
easy.
2. Ownership or control is not lost.
Two Disadvantages of Loans - ANSWER 1. Interest is charged on the amount borrowed.
2. Interest rates can fluctuate.
Two Advantages of Crowd-Funding - ANSWER 1. Offers the ability to raise finance from a large number of
investors.
2. No interest is paid.
Two Disadvantages of Crowd-Funding - ANSWER 1. Partial loss of ownership.
2. No guarantee that the crowd fund will attract sufficient investment to meet the proposal.
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