sources of finance

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internal sources of finance
funds found inside the business
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external sources of finance
funds found outside the business
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examples of internal sources of finance
owners capital (personal savings) , retained profit and sale of assets
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owners capital
money provided by owners in the business
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sale of assets
what a business owns e.g. stock, equipment
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retained profit
profit of a company that are not distributed to shareholders as dividends
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advantages of internal sources of finance
no interst charges to pay so its cheaper
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disadvantages of internal sources of finance
required the business to be profitable in the first place
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examples of external sources of finance
loans, overdraft, leasing, trade credit, debentures, money from family/friends, grant
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loans
+interest is agreed in advance -bank may require security for the loan
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overdraft
+flexible way of borrowing short term money -interest rates are higher than a bank loan
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leasing
+dont need lareg sums of money to buy equipment -over a logn period of time leasing is more expensive
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trade credit
+dont have to pay for the good for 30-60 days -if not paid early the cost of good can be higher
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debentures
+interest fixed for the period of time so easy to budget -failure to pay interst the holder could seize your assets
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money from family/friends
+family members may not charge interest -family/friend maybe expected to be involved in the busienss -realtionships may suffer if the business fails and money cannot be paid back
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grant
+cost free money from the local authority
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share capital
only companies can issue shares
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venture capital
venture capatilist more willing to invest in a company as they will share limited liability
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Other cards in this set

Card 2

Front

funds found outside the business

Back

external sources of finance

Card 3

Front

owners capital (personal savings) , retained profit and sale of assets

Back

Preview of the back of card 3

Card 4

Front

money provided by owners in the business

Back

Preview of the back of card 4

Card 5

Front

what a business owns e.g. stock, equipment

Back

Preview of the back of card 5
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