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Business AS AQA

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  1. 1-1-the-nature-and-purpose-of-business as
    3 主题
  2. 1-2-forms-of-business as
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  3. 1-3-the-external-environment as
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  4. 2-1-management-and-leadership as
    3 主题
  5. 2-2-management-decision-making as
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  6. 2-3-the-role-and-importance-of-stakeholders as
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  7. 3-1-marketing-objectives as
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  8. 3-2-understanding-markets-and-customers as
    5 主题
  9. 3-3-making-marketing-decisions as
    2 主题
  10. 3-4-the-marketing-mix as
    7 主题
  11. 4-1-operational-objectives as
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  12. 4-2-operational-performance as
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  13. 4-3-efficiency-and-productivity as
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  14. 4-4-quality as
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  15. 4-5-inventory-and-supply-chain-management as
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  16. 5-1-financial-objectives as
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  17. 5-2-financial-performance as
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  18. 5-3-sources-of-finance as
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  19. 5-4-cash-flow-and-profit as
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  20. 6-1-human-resource-objectives as
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  21. 6-2-human-resource-performance as
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  22. 6-3-organisational-design as
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  23. 6-4-human-resource-planning as
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  24. 6-5-motivation as
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  25. 6-6-improving-employer-employee-relations as
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Exam code:7131

Why businesses need finance

  • All businesses need finance to get started, allow them to grow and fund their continuing activity

    • Finance may be needed for capital expenditure, which is spending on fixed assets such as equipment, buildings, IT equipment and vehicles

    • Similarly, finance is required for operating expenditure, which is spending on raw materials or day-to-day expenses, such as wages or utilities

Why business finance is needed

Flowchart showing reasons businesses need finance: short-term costs, start-up expenses, long-term investments and growth initiatives.
Business finance is needed to meet short-term and long-term needs and can be used to set up or grow a business

Start-up finance

  • A new business needs start-up finance to pay for fixed assets and current assets such as inventory before it can begin trading

  • The amount of start-up finance a business needs is identified in the business plan

    • Owners often invest their own capital into a new business

    • Some small new business owners obtain a start-up loan to cover initial costs

Finance for growth

  • As a business grows, it may need more finance to purchase capital equipment

    • It may require more machinery, buildings, IT infrastructure or vehicles, which help the business to increase output

  • If a business wants to grow by developing new products, large amounts may need to be invested in research and development (R&D)

    • E.g. Apple‘s annual R&D expenses for 2023 were $29.915bn, a 13.96% increase from 2022, to invest heavily in artificial intelligence (AI) and product innovation

Working capital

  • Finance is required for working capital, which is spending on raw materials, wages or utilities

  • Having a steady flow of working capital is essential to keep the business operational

    • Without working capital, the business would be unable to cover its day-to-day expenses

    • It may suffer cash-flow problems, which could lead to business failure

The need for finance at Innocent Drinks

Timeline

Source of finance

Explanation

1998

  • Founders’ own savings and credit cards

  • Three friends who established the business paid for fruit, bottles and their first market stall

  • No bank would lend to a brand-new smoothie idea

1999

  • A £250,000 angel investment from businessman Maurice Pinto

  • This cash let them move from a kitchen to a proper factory and hire a few staff

  • The business was now able to supply supermarkets for the first time

2001–2008

  • Bank overdrafts and short-term loans for working capital

  • An overdraft covered everyday bills (e.g. paying suppliers) until shops paid them

  • When sales fell in the 2008 credit crunch, Innocent’s bank suddenly asked for its money back, showing it still needed extra funding

2009

  • Raised £30m share capital by selling a 20% stake to Coca-Cola for £30m

  • The money kept the business safe during the recession

  • It paid for adverts and expansion into other European countries

2010

  • Sold more shares to Coca-Cola, which increased its stake to 58%

  • A further £65m investment helped launch new drinks and enter more countries

  • Some early investors, such as Maurice Pinto, were bought out

2013

  • Remaining shares sold to Coca-Cola

  • Full ownership gave Innocent access to Coca-Cola’s worldwide factories, trucks and marketing expertise so it could keep growing

2014–2023

  • Loans from Coca-Cola to support further growth

  • E.g. Innocent received €225m from Coca-Cola to build “The Blender”, a carbon-neutral factory in Rotterdam

  • The new plant helped Innocent make far more smoothies itself, cut transport miles and work towards its net-zero goals

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