Internal sources of finance Flashcards
1
Q
Internal source of finance
A
Source of finance from within the business
2
Q
Owners funds
A
Money that is put into the business from the private savings of owners.
3
Q
OWNERS FUNDS:
ADVANTAGES
A
- There is no need to pay interest or even repay finance
- Retention of ownership by the individual
4
Q
OWNERS FUNDS:
DISADVANTAGES
A
- Amount available may be limited
- Puts stress on the day to day finance of the individual
5
Q
RETAINED PROFITS
A
When businesses make profits, the owners can decide to spend those on themselves or to use some or all of the profits to expand and improve the business.
6
Q
RETAINED PROFITS:
ADVANTAGES
A
- Internal, therefore no need to repay
- Instantly available
- Does not incur additional costs such as interest payments
- Control is not lost
7
Q
RETAINED PROFITS:
DISADVANTAGES
A
- Limited funds available
- Shareholders prefer to see short term returns on their investment
- Not an option for a start up business
8
Q
SALE OF AN ASSET
A
Some businesses will have possessions that they no longer need. These can be sold off to raise money needed for other investments
