Internal Finance

Question 1

Retained Profit

Answer 1

Profit after tax that is put back into the business and not returned to the owners. Most important!

Question 2

Owner’s Capital

Answer 2

Capital is mney provided by the owners in a business which in most cases is how a business starts

Question 3

Sale of Assets

Answer 3

Selling unwanted assets such as machinery, absolute stock and land

Question 4

Sale and leaseback

Answer 4

Selling an asset, such as machinery, that the business need but leases the asset back to use

Question 5

Advantages of Internal Finance

Answer 5

Capital is available immediately as there is no time delay between identifying a need for finance and obtaining it.
No need for third parties and interests payments therefore is cheaper.

Question 6

Disadvantages of Internal Finance

Answer 6

Can be limited - may not be sufficiently profitable to use retained profti or have unwanted assets to sell.
Not as flexible compard to external finance as theyre is a wide variety of funding options.