Accounting - Sources of Finance (Internal) Flashcards
1
Q
What is meant by Internal finance?
A
Refers to funds that are generated from within the firm itself; that is from owner’s equity.
2
Q
What are examples of Internal Finance?
A
Capital Contribution and Retained Earnings
3
Q
What is Capital Contribution?
A
Refers to funds contributed by the owner to commence, support or expand business operations.
4
Q
Why is Capital Contribution important for small businesses?
A
It is important because banks and other lenders will be reluctant to extend finance to unproven business.
5
Q
What are retained earnings?
A
Refers to business profits that are kept to fund further expansion, only available to businesses that are making a profit
