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Internal finance sources (examples) (owners capital (personal savings -…
Internal finance sources (examples)
Internal Finance: is finance raised from within the business
owners capital
personal savings
- money that is
provided by the owner
of business
from their savings or personal wealth
used by smaller businesses
such as sole traders / partnerships, this is a practical method for these types of business
as if they have no experience of running a business they are unlikely to get a loan grant.
advantages: cheap source of finance, owner has full control. disadvantages: risk of losing fundings
retained profits
is profit that is reinvested in the business
rather than
distributed to the shareholders or owners
advantages:
cheap source of finance as your do not have to pay interest rates
disadvantages:
low dividends may dissatisfy the shareholders
, not suitable for
businesses to start-up
sales of assets
as
asset
is
any item that is owned by a business
advantages:
the asset may no longer be needed by the business therefore it is a good source of finance
disadvantages:
lower your long-term profits
if you are selling an asset that is needed