Raising finance

Capital expenditure

Spending on fixed assets

Examples of capital expenditure

Equipment, buildings and vehicles

Revenue expenditure

Spending on raw materials or day to day expenses

Examples of revenue expenditure

Wages or utilities

Internal source of finance

When finance comes from inside the business

What are 3 sources of internal finance

Owners capital, retained profit, sale of assets

Examples of owners capital

Savings or redundancy payment

Retained profit

Profit that has been generated in previous years is reinvested into the business

Sale of assets

Selling business assets that are no longer required

Advantages of using internal finance

Doesn’t involve interest, doesn’t involve third parties who may want to influence decisions

Disadvantages of using internal finance

Significant opportunity cost, may not be sufficient