BUSINESS: UNIT 2: CH 24: INTERNAL FINANCE

KW capital expenditure

money spent to acquire items in a business that will last for more than a year and will be used over and over again

KW Revenue expenditure

Money spent on the day to day running of a business, needs to be covered immediately to keep the business functional

KW owners capital

money generated by the person who owns the business and is invested back into the business to fund operations

Advantages and limitations of owners capital

+ maximize control over business

+ no interest is paid

- huge risk

- amount is usually limited

KW Retained profit

profit after tax that is reinvested back into the business.

Advantages and limitations of retained profits

+ cheap and easy

+ doesn't have to be used immediately

+ no interest

- opportunity cost-money cannot be returned to the owners

- not possible for new businesses or struggling ones

- eliminates emergency funds

KW Sale of assets

an established business will sell unwanted items like machinery, old stock, land or buildings to fund other projects

Advantages and limitations of sale of assets

+ removes unwanted or unused items

+ no interest paid

- new businesses cannot use can't sell items

- can be difficult to find a buyer