Internal Finance (2.1.1)

Question 1

What are the three ways of getting Internal Finance?

Answer 1

-Owner’s Capital (Personal Finance)
-Retained profit
-Selling of Assets

Question 2

What is Owner’s Capital?

Answer 2

Owner’s Capital, also called owner’s equity, is the equity account that shows the owners’ stake in the business. In other words, this account shows the how much of the company assets are owned by the owners instead of creditors. The amount of money that the owner has invested in their own business minus any liabilities owed by the business.

Question 3

What are the advantages of using Owner’s Capital as a method of Internal Finance?

Answer 3

-No Interest Repaid
-No equity given up
-No applications

Question 4

What are the disadvantages of using Owner’s Capital as a method of Internal Finance?

Answer 4

-May be limited
-Risk of loss
-Unlimited Liability

Question 5

What is Retained Profit?

Answer 5

Retained profit is the profit that a business does not pay out to its shareholders, but keeps within its accounts. Retained profit can be used to reinvest in the business, pay off debts, or save for future needs.

Question 6

What are the advantages of using Retained Profit as a method of Internal Finance?

Answer 6

-No Interest Repaid
-No equity given up
-No applications

Question 7

What are the disadvantages of using Retained Profit as a method of Internal Finance?

Answer 7

-Slow
-Miss Opportunities
-Unhappy Shareholders

Question 8

What is the Sale of Assets?

Answer 8

The sale of assets refers to a business selling some or all of its property. This is frequently done as part of the sale or closing of a business or a merger between two businesses.

Question 9

What are the advantages of Selling Assets as a method of Internal Finance?

Answer 9

-No Interest Repaid
-No equity given up
-No applications

Question 10

What are the disadvantages of Selling Assets as a method of Internal Finance?

Answer 10

-May be needed
-Less future revenue
-Lack of buyers