Internal sources of finance

Question 1

Benefits of retained profit

Answer 1

• There is no extra cost (bank loans have interest rates but retained profits are money that the business owns)

Question 2

Benefits of sales of fixed assets

Answer 2

• No direct cost to the business

- Can often raise a lot of money

Question 3

Limitations of retained profit

Answer 3

• Takes time to have a lot of retained profits

- Only available when the business is profitable

Question 4

Limitations of sales of fixed assets

Answer 4

• May be hard to sell

- Future fixed costs of the business will increase as they now have to pay annual leasing charges to the new owner