IGCSE, A Level Business Student Forum

Dowson is a large business which owns a number of shops. It sells a range of electrical goods such as computers and televisions. The Finance Director has been looking at some recent financial data, as shown in the table below. He is pleased with Dowson's liquidity but knows he must reduce its high level of debt including an overdraft of $6m. He said: 'The economy is in recession. Many small retailers have failed. Size is an advantage!’

Extract of financial data for Dowson 05 Identify and explain two ways in which the size of the business may benefit Dowson [6]

[KN] Economics of scale will be achieved
[APP] As dowson bought matarial in bulk which will benifit them as they get matarial in low prices.
[AN] Thus, this would lead to increase in the profit margin of dowson and also decrease cost of production.
[KN] stronger market presence.
[APP] As dowson is a bigger business and had a well known brand that is known by eyeryone which would lead to greater market share among their competitors.
[AN]Since This can lead to higher sales, which would lead to improved customer loyalty, and more stable revenue.