Business Studies - Section Eight - Large Firms

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Sources of Finance -  Large Firms

  • As firms grow and become more established , new sources of finance become available to them: -Retained profits -Re-invested savings -Fixed assets[selling fixed assets(e.g.machinery) that are no longer in use] -Shares -Debentures -Loans/mortgages.
  • Re-invested savings - Large, successful firms may have used retained profit from previous years to build up bank savings or buy stocks and shares. They can use these to get cash quickly if they need it.
  • Debentures - Limited companies can issue debentures to the public. These are long-term loans which the firm commits itself to repay with interest - for up to 25 years or so. People who are issued with debentures don't own any part of the business
  • Several factors influence which sources are available to a particular business, and which it should actually use: 1)Type of company - not all companies have access to all types of finance: -Some types of business may not have fixed assets available to sell
  • 2) Amount of money needed - a company wouldn't issue more shares to buy a toaster. Small amounts of money usually come from retained profits or savings. Larger amounts of money (e.g…

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