2.6 Raising Finance

Question 1

Sources of finance can be…

Answer 1

Internal or external

Question 2

When is short term finance required?

Answer 2

To pay suppliers or cover temporary shortages of cash

Question 3

What should a business consider when choosing a source of finance?

Answer 3

. Amount of money required
. Level of risk required
. Cost of the finance

Question 4

Internal Sources of finance:

Answer 4

. Owners capital
. Selling assets
. Retained profit

Question 5

What is Owners capital?

Answer 5

. Money the owner invests into the business often from their personal savings
. Sole traders and Partnerships are likely to use this

Question 6

Advantage of using owners capital?

Answer 6

Easy to access and does not need paying back

Question 7

Disadvantage of using owners capital?

Answer 7

The amount of finance that can be raised is limited because it depends on the personal wealth of the owner

Question 8

What is selling assets?