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3.2 Sources of finance

Unit 3.2 - Sources of finance

Learning outcomes

Finance is necessary for all business, from starting up a new business, to upgrading its capital equipment or to funding its expansion plans. This section of the IB Business Management syllabus examines the various sources of finance available to different organizations. Some of these sources are internal and others are external. Student also need to understand the appropriateness of different sources of internal and external finance.

The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:

  • The following internal sources of finance (AO2):

•  Personal funds (for sole traders)
•  Retained profit
•  Sale of assets

  • The following external sources of finance (AO2):
    •  Share capital
    •  Loan capital
    •  Overdrafts
    •  Trade credit
    •  Crowdfunding
    •  Leasing
    •  Microfinance providers
    •  Business angels

  • Appropriateness of short- or long-term sources of finance for a given situation (AO3)

 Teacher only box

Note to teachers

The following external sources of finance have been removed from the new syllabus (first exams 2024):

  • Grants

  • Subsidies

  • Debt factoring

  • Venture capital

Therefore, when using resources such as past examination questions and mark schemes, please be careful not to include the above external sources of finance with students for the new course.

Also, note that "Short, medium and long-term finance (AO1)" has been removed. There is no longer any reference to "medium-term finance". The new guide only refers to short-term and long-term sources of finance.

Finally, please note that microfinance providers was previously taught in Unit 1.2 (as a form of legal business entity).

Please be aware of this change if/when using resources for the previous syllabus, such as past IB exam papers and mark schemes.

 Top tip!

There is a lot of technical jargon in this section of the syllabus, so make sure that your students check their understanding of the key terms stated on page 34 of the IB Business Management Guide.

Students can also check and review the glossary of key terms included at the end of each section on the InThinking Business Management website.

 Watch this short but entertaining video clip from Dragon's Den that features "Steve Jobs" making a pitch to secure sources of finance for his idea of the iPad:

Of course, Steve Jobs never had to seek any sources of finance from the Dragons - the video clip is a light-hearted way to introduce this topic to students. It does, however, highlight the challenges that entrepreneurs face at times, when trying to secure finance from investors. It also highlights the potential opportunities that investors lose out on by not backing business ideas that may thrive with the financial backing of suitable sources of finance.

 InThinking Business Management resources

Click the hyperlinks below to access the InThinking resources for this particular section of the IB Business Management syllabus. 

Return to the Unit 3 - Finance and accounts homepage

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