26 - Internal finance

what is internal finance

money generated by the business or its current owners

What is owners capital?

The money provided by the owners in a business
aka personal savings

what is retained profit

Profit after tax that is put back into the business and not to owners

what is the opportunity cost for retained profit

money going back into business means that
... owners may not have enough finances to fund their lifestyle
... shareholders receive lower dividends

what is sale of assets/ selling assets

selling something of value, but unwanted to raise finances

What is a sale-leaseback?

selling assets and leasing them back to buyer

advantages of internal finance

- cheap (no interest, slow costs)
- capital is available immediately
- no third parties
- no credit checks

disadvantages of internal finances

-limited
-inflexible with options
-opportunity costs

what is revenue expentidure

expenses involved in the day to day running of the business

Examples of *revenue expenditure*

- Rent
- Wages
- Utility bills (e.g., water and electricity)

what is capital expentidure

money spent on assets that will be used repeatedly

examples of capital expenditure

The purchase of any *fixed asset*:
- land
- buildings
- machinery

List the types of internal finance

-owners capital
-sale and leaseback
-selling assets
-"employee shares"