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Finance case study. Explain two methods that John and Jackson might have used to finance the business start up.

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Introduction

Finance case study Model answers and mark schemes Outline the main costs and revenues for the business (4 marks) AO1: Kn: State start up costs and running costs AO2: Ap: state costs that are relevant to their business Costs of a business are outgoings and examples for John and Jackson's business are machinery, materials for washing ie: sponges and liquids, rent of the premises and space, as well as furnishings for the waiting area ie: TV and seating. Revenues is money coming into the company from customers, the main revenues are from car washing, car care products and coffee and snacks. Explain two methods that John and Jackson might have used to finance the business start up. ...read more.

Middle

Recommend which would be best. Give reasons for your answer. AO1: Kn: show understanding of the different sources of finance AO2: Ap & An: discuss the advantages and disadvantages of both methods AO3 / 4: Ev: making a judgement - which one is better and why. Borrowing the money from Jackson's father would be beneficial because there would be no interest on the loan and the money could be obtained easily and quickly allowing them to get on with starting the business, they also may not need to pay the money back immediately which will help initially with cash flow. However, if the father has put a large amount of money into the business he will in time expect a share of the profits which will mean less profit for John and Jackson. ...read more.

Conclusion

Also if the business is not successful and does not make any profit the loan will still have to be paid back to the bank, they may have to sell off their assets and personal belongings especially if they are a partnership with unlimited liability. With this in mind I think it would be better in the first instance for them to borrow the money from Jackson's father because although this may lead to less profits for each of the owners and possible disputes it is less risky until the business is up and running and proves to be a success. The cash flow problems associated with interest payments on loans could force them out of business. ...read more.

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