Syllabus: International Baccalaureate - Individuals and Societies - Business management (Higher Level)
Module: Unit 3: Finance and Accounts
Lesson: 3.1 Introduction to Finance
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Introduction
This article supports delivery of IB Business Management HL Unit 3.1: Introduction to Finance, part of the Individuals and Societies subject group. It aligns with the International Baccalaureate’s emphasis on applied understanding, global thinking, and interdisciplinary connections.
Unit 3.1 introduces the core reasons businesses need finance and sets the foundation for financial decision-making throughout the rest of the unit. For both business specialists and general educators supporting careers provision, this topic provides critical insight into how organisations fund operations, manage costs, and assess financial risks.
As financial literacy and commercial awareness become non-negotiable skills for young people entering the workplace, this lesson is a powerful bridge between theory and real-world readiness.
Key Concepts
According to the IB Business Management HL specification, Unit 3.1 covers:
The need for finance: Understanding why businesses require finance – from start-up capital to working capital, and long-term investments.
Capital expenditure vs. revenue expenditure: Distinguishing between one-off asset purchases and day-to-day operational costs.
Internal vs. external sources of finance: Exploring retained profit, personal funds, overdrafts, loans, trade credit, and more.
Short-, medium-, and long-term finance: Categorising finance based on the duration and purpose of borrowing.
Appropriateness of sources: Analysing which funding options suit different business contexts, considering risk, cost, and ownership implications.
These concepts build the foundation for deeper financial analysis in Units 3.2–3.9 and are essential to understanding how organisations make informed financial decisions.
Real-World Relevance
Understanding finance in a business context is essential for navigating today’s economic environment. Students can connect this unit to current events such as:
High-profile funding rounds in tech start-ups (e.g., Monzo or Revolut) that rely on venture capital and crowdfunding.
The collapse of retailers like Wilko, which illustrates poor working capital management and over-reliance on short-term borrowing.
Sustainable fashion brands that choose ethical but capital-intensive production methods—highlighting trade-offs in capital vs. revenue expenditure.
Teachers can also use examples from student life, such as comparing student loans (long-term borrowing) with overdrafts (short-term borrowing), to show how the same principles apply personally and professionally.
How It’s Assessed
IB assessments focus on both knowledge and application. In Paper 1 and Paper 2, students may encounter:
Structured response questions testing definitions, comparisons, and classifications (e.g., explain the difference between internal and external finance).
Extended response questions requiring contextual application (e.g., evaluate the most appropriate source of finance for a growing business).
Command terms to emphasise include: distinguish, analyse, evaluate, recommend – these signal the depth and structure expected in answers.
To support success, students should be encouraged to use real examples, balance arguments, and justify recommendations with financial reasoning.
Enterprise Skills Integration
Unit 3.1 is a natural fit for developing commercial awareness and decision-making skills. Students are asked to:
Analyse cost-benefit trade-offs in financing decisions.
Consider how finance affects risk, ownership, and long-term planning.
Practice applying their knowledge to simulated scenarios, such as selecting funding for a product launch or expansion.
Enterprise Skills’ simulations and Skills Hub tools support this by offering realistic funding dilemmas, budget allocation tasks, and break-even analyses. These tools are proven to increase comprehension by up to 73% compared to traditional learning methods.
Careers Links
Finance is a core function across every sector. This unit links clearly to:
Gatsby Benchmark 4: Students apply curriculum knowledge to real business problems.
Gatsby Benchmark 5: Employer encounters can explore how finance professionals assess risk, justify investment, or manage budgets.
Gatsby Benchmark 6: Simulations and role-based tasks provide virtual experiences of financial decision-making.
Relevant career pathways include:
Finance Analyst
Business Advisor
Management Consultant
Corporate Banker
Entrepreneur
Even outside of finance-specific roles, budgeting, investment decision-making, and financial literacy are considered essential professional skills.
Teaching Notes
Common pitfalls:
Students often confuse internal vs. external finance – using simple, relatable examples (e.g., using savings vs. asking a friend for money) can clarify.
The difference between capital and revenue expenditure may feel abstract – bringing in examples like buying a delivery van vs. paying for fuel helps.
Students may default to choosing the “cheapest” source of finance. Challenge them to consider control, risk, and repayment factors.
Suggested activities:
Mini case study: Present a fictional business needing to finance growth, and ask students to choose the most appropriate source of finance using IB command terms.
Simulation task: Use Skills Hub scenarios where students must choose between equity and debt funding under time pressure and stakeholder constraints.
Cross-subject links: Pair with maths (interest rates, percentages) or economics (opportunity cost, market conditions).
Extension ideas:
Investigate a local business and interview the owner about how they financed their operations.
Compare financial approaches in a public vs. private sector organisation.
