Chapter 24 - Internal Finance Flashcards
(15 cards)
What is Retained Profit?
Profit kept in the business rather than paid out to shareholders
Retained profit is often used for reinvestment or to cover future expenses.
Define Owner’s Capital.
Money invested into the business by its owner
Owner’s capital is a form of equity financing.
What are Personal Savings in the context of business funding?
Money the owner has saved and uses to fund the business
Personal savings can provide a quick source of capital.
What does Sale of Assets refer to?
Selling business-owned items to generate cash
This can include equipment, inventory, or property.
What is Working Capital?
The money available for day-to-day operations
Working capital is crucial for ensuring smooth business operations.
Define Internal Sources of Finance.
Finance from within the business, like retained profit
Internal sources can provide funding without incurring debt.
What is Bootstrapping?
Starting a business with minimal financial resources
Bootstrapping often involves leveraging personal funds and assets.
What does Trade Credit mean?
Buying goods or services and paying for them later
Trade credit can help businesses manage cash flow.
Define Cash Flow.
The movement of money in and out of a business
Positive cash flow is essential for business sustainability.
What is Self-financing?
Using personal or internal funds rather than external finance
Self-financing can reduce reliance on loans or investors.
What is Depreciation?
The loss of value in an asset over time
Depreciation affects financial statements and tax liabilities.
Define Liquidity.
How easily assets can be converted into cash
High liquidity means a business can meet short-term obligations.
What does Reinvestment mean?
Using profits to grow the business
Reinvestment can lead to business expansion and increased profitability.
What is Cost Minimisation?
Reducing expenses to increase profit
Effective cost minimisation strategies can enhance competitiveness.
Define Internal Reserves.
Funds kept aside for future use
Internal reserves can provide a safety net during financial difficulties.
