Sources of Finance

Capital & Revenue Expenditure,

Internal & External

Sources of Finance for Start-Ups

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  • Created by: Michael
  • Created on: 31-01-10 20:47

Sources of Finance

Capital expenditure = one-off payment e.g. equipment, training + development, storage

Revenue expenditure = money that can be used again and again e.g. wages, training + development, pensions, maintenance, raw materials, storage, petrol


Internal = Retained profit; Working capital; Sale of Assets

External = Long term

  • Share capital (ordinary shares; preference shares; deferred shares)
  • Loan Capital (mortgage; debentures; government; other financial institutions)

Short term

  • Bank loan (overdraft; hire purchase; trade credit; leasing; credit card)
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Sources of Finance DEFINITIONS

Issued Share Capital = money raised from the sale of shares

Authorised Share Capital = maximum amount of shareholders want to raise

Dividend = buyer of the share is entitled to a share in the profit of the company

Ordinary Shares = no guaranteed dividend

Preference Shares = owners of shares receive a fixed rate of return

Deferred Shares = shareholders only receive dividend after ordinary shareholders have been paid a minimum amount

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