Sources of finance- internal Flashcards
What are internal sources of income
Ways the business can receive money from within the business.
Examples of internal sources of income
Retained profit, net current assets, sale of assets.
Retained profit
Profit kept by the business to fund future expenditure.
Advantages of retained profit
No interest charges, immediately available, and there is no loss of ownership or control.
Disadvantages of retained profit
amount available may be limited, reduces the amount to the shareholders which may cause dissatisfaction.
Net current assets
current assets-current liability, shows the money available in the business to fund day to day expenditure.
Advantages of net current assets
business can manage the cash flow effectively.
Disadvantages of net current assets
there is pressure on customers because they are offered shorter credit terms.
Sale of assets
Selling an item of worth by a business in return for an immediate cash injection.
Advantages of sale of assets
no interest charges, disposal of an asset no longer of use.
Disadvantage of sale of assets
May be expensive in the long run if assets need to be leased back.
Is retained profit short term or long term?
Long term
Is net current assets short term or long term?
Short term
Is sale of assets short term or long term?
Short term
