Sources of finance- internal

Question 1

What are internal sources of income

Answer 1

Ways the business can receive money from within the business

Question 2

Examples of internal sources of income

Answer 2

Retained profit, net current assets, sale of assets

Question 3

Retained profit

Answer 3

Profit kept by the business to fund future expenditure.
Long term source of finance

Question 4

Advantages of retained profit

Answer 4

No interest charges, immediately available, and there is no loss of ownership or control

Question 5

Disadvantages of retained profit

Answer 5

amount available may be limited, reduces the amount to the shareholders which may cause dissatisfaction

Question 6

Net current assets

Answer 6

current assets-current liability, shows the money available in the business to fund day to day expenditure.
Short term

Question 7

Advantages of net current assets

Answer 7

business can manage the cash flow effectively

Question 8

Disadvantages of net current assets

Answer 8

there is pressure on customers because they are offered shorter credit terms

Question 9

Sale of assets

Answer 9

Selling an item of worth by a business in return for an immediate cash injection
Short term

Question 10

Advantages of sale of assets

Answer 10

no interest charges, disposal of an asset no longer of use

Question 11

Disadvantage of sale of assets

Answer 11

May be expensive in the long run if assets need to be leased back