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Unit 2 Business Resources P4 P5 P6 P7 M3 M4 D2 D3
- Module
- Unit 2 - Business Resources
- Institution
- PEARSON
All criteria achieved. This was part one of an assignment that had two tasks.
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Lauren WhiteUnit 2 Business Resource – Assignment 2: Money,
Money, Money
In this assignment I will be discussing how Tesco funds it business and how budgeting is
important in order to be a successful company. I will also be discussing how financial ratios are
used in order to assess the financial position of a business.
P4 - Describe sources of internal and external finance for a
selected business
Tesco is funded from internal and external sources in order to keep the business running
smoothly. They are essential to ensure they have enough money in order to produce their
products in order to make a profit. Many businesses use their owner’s saving’s as an internal
source of finance, however this is not relevant for a large organisation such as Tesco. An
internal source of finance for Tesco is retained profits. This means they use a percentage of
their profits to put back into the business to enable the business to be funded effectively. This is
a good way of funding for a large business such as Tesco because they make a large profit from
their customers. This means they can rely on this source to keep the business funded. Despite
this, if the amount of profit drops they may need to turn to other methods to fund the
business. Tesco does have other sources of finance to ensure they also have a way of being
funded so even if profits drop they can still run smoothly as a business. Another internal source
of finance for Tesco is their fixed assets. These assets include land, buildings and equipment.
These assets are hard to turn into cash but are useful when a business such as Tesco needs to
make a large payment or need to fund new operations. An example of this can be when
equipment needs to be replaced. Tesco can sell their old equipment in order to fund the new
equipment needed.
Tesco also has external sources of finance in order to fund them. Firstly, they have long and
medium-term debt capital market issues. This means if they need a source of funding, due to
their other methods being unsuccessful, they can borrow money to ensure they can still be
funded. This is essential for a large business such as Tesco as they need to know they always
have the money needed to fund the business. If they didn’t have this they wouldn’t have funds
in times where the business is not performing as well. Tesco knows they have this source of
finance to fall back on when needed, meaning they know they won’t ever have the issue of not
having a way of being funded. Another external source of finance is bank loans. Tesco receives
bank loans in order to receive funding immediately. Tesco then would pay this back over a
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