Interest
Cost of borrowing; paid by borrower to lender.
Formula
Interest = Principal × Rate × Time
Real World
When the Bank of England raised the base rate to 5.25% in 2023, businesses with variable-rate loans immediately faced higher monthly repayments, squeezing cash flow for SMEs like independent retailers already under post-pandemic pressure.
Exam Focus
Show the impact of rising interest rates on cash flow and investment decisions — link to external environment for higher-mark 'analyse' responses.
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