Item A: Arcade Atlas develops educational mobile games. It needs £180,000 to launch in overseas markets. The founder has £35,000 of savings. Last year, the business had sales revenue of £240,000 and profit of £18,000.
State one financial objective Arcade Atlas may have.
A venture-capital firm will invest the full £180,000 in return for 30% ownership and a place on the board. It also offers experience of international marketing.
Outline one benefit to Arcade Atlas of using venture capital.
Arcade Atlas is considering two sources of finance:
Option 1: Accept the venture-capital investment
Option 2: Take a five-year bank loan of £180,000 at 8% interest, secured against business assets
Justify which one of these two sources of finance Arcade Atlas should choose.
38 exam-style questions on Edexcel GCSE Business 1.3 Putting a business idea into practice, covering 1.3.1a Financial aims and objectives, 1.3.1b Non-financial aims and objectives, 1.3.1c Why aims and objectives differ, 1.3.2a Revenue, costs and profit calculations, 1.3.2b Break even and margin of safety, 1.3.2c Interpretation of break even diagrams, 1.3.3a The importance of cash to a business, 1.3.3b The difference between cash and profit, 1.3.3c Cash-flow forecasts: inflows and outflows, 1.3.3d Cash-flow forecasts: net cash flow and balances, 1.3.4a Short-term sources of finance, and 1.3.4b Long-term sources of finance. Each one has a worked solution and a mark scheme showing where the marks go.