Syllabus: International Baccalaureate - Individuals and societies - Business management (Standard Level)
Module: Unit 3: Finance and Accounts
Lesson: 3.2 Sources of Finance
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Introduction
This article aligns with IB Business Management Standard Level, specifically Unit 3.2: Sources of Finance, part of the Individuals and Societies curriculum. As students explore how businesses fund their operations and growth, this unit develops financial literacy, commercial awareness, and evaluative thinking. These are not only core to business success but essential for workplace readiness and career confidence, as defined in the Enterprise Skills thematic framework.
Finance remains one of the most transferable knowledge areas, affecting every organisation. Whether students pursue business careers or not, understanding funding options and implications develops critical thinking, planning skills, and strategic decision-making.
Key Concepts
IB learners are expected to understand and apply the following core concepts under 3.2 Sources of Finance:
Internal sources of finance:
Retained profits
Sale of assets
Personal savings (for sole traders)
External sources of finance:
Share capital (equity finance)
Loan capital (bank loans, mortgages)
Overdrafts
Trade credit
Leasing
Grants and subsidies
Venture capital and business angels
Crowdfunding
Short-term vs long-term finance:
Understanding when and why different types of finance are appropriate based on business needs
Suitability and implications:
Cost implications (interest, ownership dilution)
Control and risk considerations
Legal structures influencing finance availability (e.g. plc vs ltd)
Students should be able to evaluate these sources in various business contexts, considering real-life needs, risks, and stakeholder impacts.
Real-World Relevance
Finance decisions are pivotal at every stage of a business lifecycle. Here are some recent practical examples to illustrate the concept in action:
Monzo Bank raised over £1 million in minutes via crowdfunding in 2023, engaging their customer base as shareholders. This illustrates the democratisation of finance and stakeholder engagement.
Gymshark, once a sole trader, used retained profit for initial growth before securing private equity funding. Its journey highlights the transition from internal to external finance as a business scales.
High street retailers increasingly rely on trade credit to manage cash flow volatility, especially during peak seasonal periods such as Christmas or back-to-school.
These cases can be used as micro case studies in lessons, helping students link textbook theory with evolving finance strategies in the real world.
How It’s Assessed
In the IB assessment model, finance topics are typically tested through:
Paper 1: Case study-based structured and extended response questions
Paper 2: Stimulus-response questions using data from real or hypothetical businesses
Command terms:
Explain: “Explain one advantage of using retained profits to fund expansion.”
Evaluate: “Evaluate the suitability of venture capital as a source of finance for a technology start-up.”
Distinguish / Compare: Used when contrasting two types of finance
Assessment objectives include both factual recall (AO1) and evaluative application (AO3), so students must practise structured analytical writing backed by real-world or case-based examples.
Enterprise Skills Integration
Finance decisions exemplify real-world problem-solving, a core theme within Enterprise Skills’ platform. Business simulations like those in Skills Hub Futures challenge students to decide:
Should a company raise finance through a loan or issue equity?
What are the risks of short-term borrowing versus long-term investment?
How do funding decisions affect control, stakeholder perceptions, and long-term strategy?
By integrating these dilemmas into simulations, students practise:
Strategic decision-making
Risk analysis
Budget management
Cost-benefit evaluation
This aligns with core enterprise skillsets like data-driven decision-making, financial literacy, and stakeholder awareness, all of which are central to our commercial awareness framework.
Careers Links
Understanding sources of finance builds competencies directly aligned with Gatsby Benchmarks 4, 5 and 6:
Benchmark 4 – Linking curriculum to careers: Finance knowledge is crucial across sectors, from non-profits to tech start-ups.
Benchmark 5 – Encounters with employers: Students can engage with real case studies or employer videos discussing funding strategies.
Benchmark 6 – Experiences of the workplace: Simulations replicate board-level funding decisions, with authentic consequences.
Related roles and pathways include:
Financial Analyst
Corporate Finance Associate
SME Owner/Operator
Investment Banker
Business Development Executive
Students don’t need to pursue finance to benefit. Project managers, marketers, and even creative professionals often manage budgets and need to assess financial feasibility.
Teaching Notes
Common misconceptions:
Students often confuse short-term with long-term finance and may assume all external finance involves debt.
Some may see internal finance as “free” without considering opportunity cost or limited scalability.
Teaching strategies:
Use student-friendly simulations where learners must choose a funding route for a business goal (e.g. launch a new product, expand into a new market).
Link financial decisions to case studies or school projects (e.g. school fundraiser planning: loan vs sponsorship).
Encourage role play or debate around investor vs business owner perspectives.
Extension activities:
Ask students to analyse annual reports of local or global firms to identify their funding structure.
Simulate a boardroom pitch for funding, where students propose a source of finance and justify it to “investors”.
Recommended tools:
Skills Hub platform for guided simulations and decision-making models
Financial scenario worksheets that link to core IB syllabus terms
Employer challenge videos embedded in Skills Hub Futures, bringing industry validation into classroom delivery
