Sources of Finance - Established Firms Flashcards
What are Retained Profits?
Profits that the owners have decided to plough back into the business after they’ve paid themselve a dividend.
Larger companies are under pressure from shareholders to give large dividends, reducing…
the profit they can retain.
How can Fixed assets be a source of fund?
Firms can raise cash by selling fixed assets that are no longer in use.
What is a disadvantage of selling Fixed Assets?
If you sell too many, you can’t go on trading.
What is New share issues?
When a limited company issues more shares.
What is an advantage of New share issues?
Money raised does not have to be repaid to shareholders.
What is the disadvantage of New share issues?
More shares mean less control for the existing owners, and the new shareholders will also ecpect to be paid dividends.
What is Internal Finance?
Funds that come from within the business. Quick and easy way to get money.
What are the advantages of Internal finance?
Saves borrowing and having to pay back interest.
What is a disadvantage of Internal finance?
Some businesses may not have enough and have to find external sources instead.
What is External finance?
Funds that come from outside of the business.
What is a disadvantage of External finance?
Usually needs to be paid back - sometimes with high interest.
What are the 4 factors that affect choice of finance?
Size and type of company
Amount of money needed
Length of time
Cost of the finance
