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Discuss the advantages to Beats Electronics of using new share capital to fund its expansion. - Edexcel - GCSE Business - Question 9 - 2015 - Paper 1
Question 9
Discuss the advantages to Beats Electronics of using new share capital to fund its expansion.
Worked Solution & Example Answer:Discuss the advantages to Beats Electronics of using new share capital to fund its expansion. - Edexcel - GCSE Business - Question 9 - 2015 - Paper 1
Step 1
Identify a benefit of new share capital to fund expansion
Answer
One advantage of using new share capital to fund its expansion is that it allows Beats Electronics to raise a significant amount of money without incurring debt. This capital can be used for various growth initiatives, such as developing new product lines or entering new markets.
Step 2
Step 3
Mention the potential for increased investor confidence
Answer
Using new share capital can also increase investor confidence. When a company raises capital through equity, it signals to investors that the business has growth potential and is committed to expanding, which may enhance its market reputation.
Step 4
Highlight the flexibility in financial management
Answer
Finally, equity financing is generally regarded as a less risky option compared to debt financing. This offers Beats Electronics greater flexibility in its financial management, allowing it to respond more effectively to market changes and business opportunities.