BTEC Business, Learning Aim D -
Advantages and Disadvantages
Two Advantages of Retained Profit - answer1. No interest charges.
2. Only available up to the amount already accumulated by the business to avoid debts.
Two Disadvantages of Retained Profit - answer1. Amount available may be limited.
2. Reduces payments to shareholders which may cause dissatisfaction.
Two Advantages of Net Current Assets - answer1. Encourages the business to manage
cash flow effectively.
2. Can fund day-to-day expenditure.
Disadvantage of Net Current Assets - answer1. Can put pressure on customers as
shorter credit terms are offered and this negatively affects relationships with suppliers if
longer credit terms are negotiated.
Two Advantages of Sale Of Assets - answer1. No interest charges
2. Reduces capital tied up in assets, releasing it for other purposes.
Two Disadvantages of Sale Of Assets - answer1. It is likely that the amount received is
not a true reflection of the value of the asset.
2. Can increase costs in the long run if an asset needs to be leased back.
Two Advantages of Owners Capital - answer1. No interest payments or need to repay.
2. High level of commitment from the owner.
Two Disadvantages of Owners Capital - answer1. Amount available is likely to be
limited.
2. If there is more than one owner this could cause friction if not everyone is able to
contribute the same amount.
Two Advantages of Loans - answer1. Regular pre-agreed repayments make planning
and budgeting easy.
2. Ownership or control is not lost.
Advantages and Disadvantages
Two Advantages of Retained Profit - answer1. No interest charges.
2. Only available up to the amount already accumulated by the business to avoid debts.
Two Disadvantages of Retained Profit - answer1. Amount available may be limited.
2. Reduces payments to shareholders which may cause dissatisfaction.
Two Advantages of Net Current Assets - answer1. Encourages the business to manage
cash flow effectively.
2. Can fund day-to-day expenditure.
Disadvantage of Net Current Assets - answer1. Can put pressure on customers as
shorter credit terms are offered and this negatively affects relationships with suppliers if
longer credit terms are negotiated.
Two Advantages of Sale Of Assets - answer1. No interest charges
2. Reduces capital tied up in assets, releasing it for other purposes.
Two Disadvantages of Sale Of Assets - answer1. It is likely that the amount received is
not a true reflection of the value of the asset.
2. Can increase costs in the long run if an asset needs to be leased back.
Two Advantages of Owners Capital - answer1. No interest payments or need to repay.
2. High level of commitment from the owner.
Two Disadvantages of Owners Capital - answer1. Amount available is likely to be
limited.
2. If there is more than one owner this could cause friction if not everyone is able to
contribute the same amount.
Two Advantages of Loans - answer1. Regular pre-agreed repayments make planning
and budgeting easy.
2. Ownership or control is not lost.
