internal finance Flashcards
(7 cards)
what does internal finance mean
money generated from inside the business
how many types of internal finance is there
3
what is owners capital
when owners provide capital from their own personal saving
what is retained profit
profit after tax that is put back into the business
what is sales of assets
an established business may sell assets that are no longer needed in order to raise finance
what are the advantages of internal finance
the capital is available immediately, it’s cheap as no interest rate is needed, the business won’t be subject to credit check, there is no need to involve third parties
what are the disadvantages of internal finance
a business may not be sufficiently profitable, there is not a wide variety of options, opportunity cost can be high
