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3.1 Sources of finance (EXTERNAL SOURCES (Loan capital, Overdrafts, Share…
3.1 Sources of finance
Capital expenditure
• Money spent to acquire items that is used more than a year.
• Fixed assets.
• Can be used as collateral.
• Long term investments.
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INTERNAL SOURCES
Retained profit
• Profit that remains after a business has paid corporation tax to the government and dividends to shareholders.
• Also known as ploughed-back profit.
• Cheap and does not incur interest charges
• Permanent source of finance.
• Flexible.
sale of assets
• When a business sells off its unwanted or unused assets to raise funds.
• May be time consuming.
• A business may adopt a sale and lease back option.
Personal funds
• A source of finance for sole traders that comes mostly from their own personal savings.
• Maximize control over the business.
• Cheap, easily available and no interests needed to be paid.
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Short-, medium- and long-term finance
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