1 - Internal Sources Of Finance Flashcards
What is meant by an “internal” source of finance?
Money created or raised within a business
Who doesn’t a business need to consult to gain access to internal sources of finance?
Stakeholders
What can a business sell of its own to make cash? What would be an example of this?
Assets
Machinery
Why is selling assets a cheap source of finance?
A business won’t have to pay interest
What can selling assets harm in a business?
Operations
What is meant by “retained profit”?
Money saved during operation
Why is retained profit a cheap source of finance?
A business won’t have to pay interest
Why is retained profit limited?
Businesses can only spend what they have
What might retained profit not be big enough to fund?
Long-term projects
What is meant by “personal savings”?
Money invested by the owner of a business
Why are personal savings mostly relevant to start-up businesses?
So the owner can fund a business venture
What is a downside to an owner using personal savings?
It can be risky with larger amounts
Why might an owner using personal savings be possibly risky?
They may not be able to afford a significant amount
