2.1 Internal Finance Flashcards
Why do businesses need finacance:
To pay staff
To innovate
To buy/ maintain assets
For marketing
To expand
Utilities
Production
To start the business up
What is internal finance?
Finance raised inside the business
Whats external finance
Finance raised outside the firm
Whats owner captical?
Wjen an entrepreneur invests their own sacings
Whats the pros of owners capital?
No interest
No repayerment
Quicker access to finance
Owner maintains control
Can motivate the owner
Cons of owners captial
Business fails owner loses money invested
Limited funds
Can impact relationships
What is retained profits?
Profits kept within a business
Pros of retained profits?
No repayment
Maintain personal saving
Highly sucessful firms will have a lot
Cons of retained profits:
Reduce financial security
Lower proft = less dividens
Not available for every business
What is sale of assets
Selling assets you own
Pros of sale of assets?
potential to raise a lot of finance
Reduce costs cos you dont have to maintain the asset no longer
Get rid of obselete assets
No interest or nothing
Cons of sale of assets
Dont have it anymore
Assets decrease in value so they might not make thatm uch
May take time to sell
What is a current asset
#?
Change in value in the short run
Non current assets?
Stay in the business for more than 1 year
