2.1.1 Internal sources of finance

what are the 3 internal sources of finance

owners capital, selling assets and retained profits

define finance

management of the investment needed to open, run and grow a business

where does internal finance come from

inside the business

give 5 reasons for raising finance

to pay debt, help with slow trade, expand, start-up a business and buy stock

what is owners capital

personal savings

which business forms would use owners capital

sole traders and partnerships

when is retained profit appropriate to use

if the business if profitable

what assets may be sold to raise finance (4)

machinery, land, premises, vehicles

what types of businesses can sell assets

all types of business

name some advantages of retained profit (3)

no interest, quick and easy access, 100% control

what are some disadvantages of retained profit (2)

limited amount, could be needed elsewhere

what are some advantages of owners capital (3)

quick and immediate access, no interest, total control

what are some disadvantages of owners capital (4)

personal loss, restricted amount, unlimited liability, personal stress

what are some advantages of sale of assets (2)

no direct cost, can bring newer assets

what are some disadvantages of sale of assets (3)

slow to sell, depreciation, less attractive to investors with less assets

define asset

an item a business owns which can be sold for cash