Syllabus: Pearson Edexcel AS Business
Module: Raising Finance
Lesson: 1.5.6 Moving from Entrepreneur to Leader

Introduction

This article supports teaching the Pearson Edexcel AS Business specification, specifically Topic 2.1.1: Internal Finance. This section sits within Theme 2: Managing Business Activities and covers the sources of finance available from within a business, setting the groundwork for understanding funding decisions and long-term sustainability.

Students are expected to apply their understanding of internal finance in both familiar and unfamiliar contexts, linking back to real business scenarios. For teachers, careers leads, SLTs, and heads, this topic supports cross-cutting priorities: financial literacy, employability, and future readiness.

Key Concepts

According to the Edexcel specification, students must understand:

• Owners’ capital (personal savings): Often the first source of funding for sole traders and partnerships. It reflects a personal financial commitment.

• Retained profit: Profit kept in the business rather than distributed to shareholders. It’s a sustainable internal source but limited by past performance.

• Sale of assets: Turning non-essential or under-utilised business assets into cash. This could involve selling machinery, vehicles, or even entire divisions.

• Advantages and disadvantages of internal finance sources:

  • No interest payments or dilution of ownership.

  • Limited availability and potential opportunity cost.

• Suitability of each method depending on the business’s size, age, objectives, and urgency of need.

Real-World Relevance

Examples from recent years help ground this topic in practice:

• BrewDog, the Scottish craft beer company, has frequently reinvested retained profit into expansion, choosing internal over external finance where possible to avoid diluting ownership.

• Marks & Spencer sold off international stores and real estate as part of a restructuring effort, showing how asset sales can support short-term liquidity.

• Micro-businesses often begin with owner’s capital, sometimes pooled from savings, redundancy payouts, or personal loans.

Bringing in these kinds of case studies can transform abstract definitions into discussions students care about – especially when linked to local enterprises or social ventures.

How It’s Assessed

Students will encounter internal finance through a range of assessment types:

• Short-answer explain questions (e.g. “Explain one advantage of using retained profit.”)

• Data response tasks requiring contextual application of finance options.

• Longer evaluation questions (e.g. “Assess the suitability of internal finance for a business planning rapid expansion.”)

Common command words:

• Explain: Describe with relevant detail and context.

• Analyse: Break down implications, possibly using cause-effect chains.

• Evaluate: Balance pros and cons, offer a justified judgement.

Assessment rewards application and nuance. A technically correct but context-free answer won’t score highly.

Enterprise Skills Integration

Teaching 2.1.1 is a golden opportunity to build enterprise thinking:

• Problem-solving: Students must assess funding strategies in different scenarios.

• Decision-making: Weighing opportunity cost or reinvestment risk.

• Financial literacy: Understanding how everyday funding choices affect growth and control.

Enterprise Skills’ MarketScope AI tool can enhance lessons by simulating funding choices in real market contexts. For instance, students can explore how funding decisions affect investor perception and long-term valuation.

Careers Links

This topic links directly to several Gatsby Benchmark objectives:

• Benchmark 4 (Careers in Curriculum): Internal finance connects to roles in SME management, financial planning, accounting, and entrepreneurship.

• Benchmark 5 (Employer Encounters): Invite a local startup founder or finance officer to discuss how they’ve used retained profits or personal investment.

• Related roles: Finance officer, business development manager, SME owner, commercial banker, startup advisor.

Careers leads can tie this topic into wider enterprise education programmes or local mentoring schemes – especially for sixth form students considering business start-ups or finance degrees.

Teaching Notes

Common pitfalls:

• Students often confuse internal and external finance sources.

• They may assume internal finance is always “free” or without trade-offs.

• Misunderstanding retained profit as an immediately available lump sum.

Teaching tips:

• Use simple, relatable scenarios (e.g. a student setting up a tutoring business).

• Use “finance choice cards” for sorting or ranking activities.

• Connect to previous content from Theme 1 on business aims and objectives.

Extension opportunities:

• Ask students to research a local business and predict which form of internal finance they likely use.

• Link to Unit 2.1.2 (External Finance) for comparative evaluation tasks.