2.1.1 - Internal Finance

Question 1

What are 3 methods of internal finance?

Answer 1

• personal savings
• retained profit
• sale of assets

Question 2

What are the advantages of using personal savings?

Answer 2

• cash is quick

* more care can mean greater success

Question 3

What are the disadvantages of using personal savings?

Answer 3

• any loss in profits is a serious loss for the owner

* owners can be over controlling if they are also the investors

Question 4

What are the advantages of using retained profits?

Answer 4

• since the business already earned the retained profits, no one will need to ask them for confidential information
• can led to the development of the business and therefore increase the value of the business’ shares which could attract further investment