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INTERNAL FINANCE DEFINED
Finance means the management and investment needed to start, run and grow a .
finance means the sources of investment that come from within the business.
REASONS A BUSINESS WANTS TO RAISE FINANCE
A business may want to raise finance to pay their , which could be suppliers that are owed money for goods and services.
A business may wish to grow and and will need an injection of capital to achieve their growth objectives.
METHODS OF INTERNAL FINANCE
Owner's is also known as owner's equity and shows that the owner has a stake in the business. Owners may have savings or money from an inheritance or a redundancy payout. They can use this cash to start the business, but may need additional help later on when they want to grow the business. Sole and partnerships would be the two forms of business that would use owner's capital.
If a business is established and has been trading for more than one year then they may have profits which they can reinvest in the business. The main advantage of retained profits is there is no interest to pay on a loan or overdraft. However, there is an opportunity associated with retained profits, as once the cash has been used it cannot be used elsewhere in the business.
A business may decide to sell their . They will not have the benefit of the asset in the business, but this carries no interest payments and can be a good way to get rid of old equipment or machinery.