Vela Foods plc wants £18 million to build a new factory. It earned £12 million profit last year and usually pays 60% of profit as dividends.
Option 1: Use retained profit and reduce the next dividend
Option 2: Issue new shares on the stock exchange
Justify which one of these two sources of finance Vela Foods plc should use.
37 exam-style questions on Edexcel GCSE Business 2.1 Growing the business, covering 2.1.1a Internal (organic) growth, 2.1.1b External (inorganic) growth, 2.1.1c Ownership for growing businesses, 2.1.1d Finance for growing and established businesses, 2.1.2a Why aims and objectives change, 2.1.2b How aims and objectives change, 2.1.3a The impact of globalisation on businesses, 2.1.3b Barriers to international trade, 2.1.3c How businesses compete internationally, 2.1.4a Ethical and environmental considerations, and 2.1.4b Pressure group activity and the marketing mix. Each one has a worked solution and a mark scheme showing where the marks go.