2.1.1 internal finance

Retained Profit

The portion of net profit that a company keeps instead of distributing it to shareholders as dividends.

Sale of Assets

Selling off business assets to raise funds.

Depreciation

The gradual reduction in the value of a fixed asset over time due to wear and tear or obsolescence.

Working Capital Management

The difference between a business's current assets and current liabilities.

Advantages of Internal Finance

Includes no reliance on external debt, no loss of ownership, flexibility in fund usage, and lower financial risk.

Disadvantages of Internal Finance

Includes limited funds available for large investments, opportunity cost, and potentially slower growth.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Financial Independence

Ability of a business to operate without external financial obligations.

Assets

Resources owned by a business that have economic value.

Current Assets

Assets that are expected to be converted into cash within one year.

Current Liabilities

Obligations a business needs to pay off within one year.

Cash Flow

The net amount of cash being transferred in and out of a business.