Theme 2- Internal finance

Question 1

What is internal finance?

Answer 1

Money that comes from inside the business

Question 2

Owners capital

Answer 2

• Money the owner invests in the business, often from personal savings
• sole traders or partnerships are likely to use this
• easy to access and doesn’t need paying back
• limited as depends on personal wealth

Question 3

Selling assets

Answer 3

• businesses can sell assets (factories, machinery) to generate capital
• only appropriate for businesses with spare assets
• Cheap as businesses don’t need to pay interest
• Means business no longer owns asset
• takes a long time to sell asset and get cash

Question 4

Retained profit

Answer 4

• profits can be built up for later investment
• some businesses don’t make enough to do this
• no interest to be paid
• may miss out on investment opportunities
• This can’t be used alone to fund expansion