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'Capdata' is a small software writing business located in the south of Ireland and employing four employees - Leaving Cert Business - Question A - 2001
Question A
'Capdata' is a small software writing business located in the south of Ireland and employing four employees. It has the opportunity to grow but has little experience... show full transcript
Worked Solution & Example Answer:'Capdata' is a small software writing business located in the south of Ireland and employing four employees - Leaving Cert Business - Question A - 2001
Step 1
Short Term Finance
Answer
Short term finance is typically required for immediate needs, such as day-to-day operational expenses. An example would be a bank overdraft, which allows a business to withdraw more than it has in its account to cover urgent bills. This type of financing is crucial for 'Capdata' to manage cash flow, especially as it grows and encounters varying revenue streams.
Step 2
Medium Term Finance
Answer
Medium term finance is generally used for acquiring assets that have a lifespan of several years. An example could be a term loan from a bank to purchase new computers or software tools. For 'Capdata', securing this loan ensures that the financing matches the asset's value and useful life, enabling the business to invest in technology that supports growth.
Step 3
Long Term Finance
Answer
Long term finance is often used for significant projects or expansion plans. An example is issuing shares to raise capital. As 'Capdata' looks to expand its team and capabilities, utilizing long term finance would ensure stability and support sustained growth, aligning the financing method with the long-term goals of the business.