Internal Sources Of Finance

Question 1

Internal Sources Of Finance

Answer 1

Money available to fund expenditure from within the business

Question 2

Retained Profit

Answer 2

Some of the profits are kept in the business to fund future expenditure

+ No interest charges
+ Available immediately

• Amount available may be limited
• Reduces payments to shareholders which may cause dissatisfaction

Question 3

Net Current Assets

Answer 3

Shows the money that is immediately available to the business to fund day-to-day expenditure

+ Encourages the business to manage cash flow effectively

• Can put pressure on customers as shorter credit terms are offered and this negatively affects relationships with suppliers if longer credit terms are negotiated
• Lower stock holdings can affect the firm

Question 4

Sale Of Assets

Answer 4

Vehicles, buildings and equipment owned by the business can be sold to give the business cash

+ No interest charges
+ Raises funds from assets that are no longer needed

• It is likely that the amount received is not a true reflection of the value of the asset
• Can increase costs in the long run if an asset needs to be leased again

Question 5

Profit Formula

Answer 5

Profit = Sales Revenue - Total Costs

Question 6

Net Current Assets Formula

Answer 6

Net Current Assets = Current Assets - Current Liabilities