2.1.1 Internal finance

Question 1

What are start up costs?

Answer 1

Costs that are needed to start a firm

Question 2

What is working capital?

Answer 2

Additional finance that is needed on a temporary basis to provide sufficient cash to cope with cash flow problems

Question 3

What is depreciation?

Answer 3

Loss in value of assets

Question 4

Define expansion?

Answer 4

Physical form of expanding a building or sales in a new market

Question 5

What is owners capital?

Answer 5

Money put into the business that is provided by the owners own savings/inheritance

Question 6

What is retained profit?

Answer 6

All the money left over once taxes/interest has been taken away from total sales revenue

Question 7

3 adv to internal finance?

Answer 7

capital available straight away - no delay
it is cheap to use - no interest
no involvement of 3rd parties

Question 8

3 disadv to internal finance?

Answer 8

It can be limited and may not be sufficient
opportunity cost
can be inflexible

Question 9

adv of owners capital?

Answer 9

doesn’t have to be repaid

Question 10

Define sale of assets?

Answer 10

assets can be sold for cash to fund business

Question 11

Revenue expenditure?

Answer 11

spending on business resources that have already been consumed or will be very shortly

Question 12

Capital expenditure?

Answer 12

spending on business resources that can be used repeatedly over a time period

Question 13

Define capital?

Answer 13

money provided by owners of the business