Internal sources of finance

Question 1

What are internal sources

Answer 1

Are sources of money from within the business, from the owner or from previous business income.

Question 2

Owners funds

Answer 2

This is the money that is put into a business from the private savings. Many businesses are using owners savings, an inheritance or redundancy pay from a previous employer.

Question 3

Advantages of owners funds

Answer 3

.There is no need to pay interest or even repay finance

.Retention of ownership by the individual.

Question 4

Disadvantages of owner funds

Answer 4

.Amount available may be limited.

.Puts stress on the day to day finance of the individual.

Question 5

What is retained profits?

Answer 5

When a business makes profit the owner can decide to spend the money on themselves or to expand and improve the business.

Question 6

Retained profits advantages

Answer 6

.No need to repay instantly
.Does not incur additional costs such as interest payments
.Control is not lost

Question 7

Retained profits disadvantages

Answer 7

.May be limited funds available
.Shareholders may want to see short term returns on their investment.
.Not an option for a start-up business.

Question 8

Sale of an assest

Answer 8

Some business will have possessions that they no longer need. These can be sold off to raise money for other investments.
.Assets may include: machinery, land, part of a business.