Internal Sources of Finance

Question 1

Owners Funds - Definition

Answer 1

This is money that is put into the business from the private savings of the owners. Many businesses started using the owner’s own savings, an inheritance or a redundancy pay from a previous employer.

Question 2

Owner’s Funds - Advantages

Answer 2

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

- Retention of ownership by the individual

Question 3

Owner’s Funds - Disadvantages

Answer 3

• Amount available may be limited

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

Question 4

Retained Profits - Definition

Answer 4

When businesses make profits, the owners can decide to spend these on themselves or to use some or all of the profits to expand and improve the business. Such profits are also called: Retained Profits or Ploughed Back Profits.

Question 5

Sale of an asset - Definition

Answer 5

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