2.2 Financing Business Activity

2.2.1 Use of funds Identify the main needs for funds
• Understand why a business needs funds

2.2.2 Short- and longterm financial needs
Appreciate the difference between short and long term finance • Understand the difference between short and long term capital needs

2.2.3 Sources of internal and external funds (short- and longterm)
Identify internal and external sources of funds available to business • Understand the difference between internal sources of capital and external sources • Knowledge of the different sources available to a business Understand the impact on business of different sources of funds • Show awareness of the possible impact of debt capital compared to owners funds

2.2.4 Factors affecting the methods of finance chosen
Explain the basis upon which the choice of sources of funds is made • Understanding of the factors to be considered in determining an appropriate source of funds • Show appreciation of the significance of size of the business, capital need, length of time and risk • Recommend and justify an appropriate method(s) of finance in a given situation