P4 Describe sources of internal & external finance for Debenhams[4]

Write a paragraph to answer each of the following:

• Refer to Debenhams
• Provide at least two reasons for each

1. Why may a bank overdraft be more beneficial than a bank loan for Debenhams?
The main reasons why overdrafts would be beneficial for Debenhams is because it has allot of flexibility and you can basically change the amount borrowed within the limits and carrying on the interest is paid only on amounts borrowed. The reasons why I wouldn’t recommend loans are purely because it’s less flexible than the overdraft option there is a like deadline that needs to be met for them to pay the bank loan back. With loans Debenhams has to pay back or they will risk other financial problems like losing properties etc. bank overdrafts are more beneficial to Debenhams purely because its more secure and flexible although an overdraft won’t let Debenhams borrow a large amount of cash but it will still allow them to borrow money the safer way.

2. Why might investors be more willing to invest into a company, like Debenhams, than save their money in a bank account?

Investors are willing to invest in a company like Debenhams purely because they know that if they invest their money they will make way more money (money makes money) if someone pays you for a certain amount of time you will get the money back plus the ‘interest. Carrying on the investors might buy the company or even a product that can increase in value or make the business grow. Taking the risk is potential for a greater investment in return. If the investor has a financial goal with long term aims, the investor will make more money by carefully investing in higher risk assets such as stocks or even bonds. The reason why investors, instead of saving their money they invest so they can make profit by waiting for the value