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A Level Business Studies - Accounting And Finance > Internal sources of finance > Flashcards

Flashcards in Internal sources of finance Deck (20)
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1

Name 3 reasons why firms need finance

1. Marketing
2. Pay wages
3. Dividends
4. Rent
5. Investment

2

Name 6 internal souses of finance

1. Personal savings
2. Sales/lease back
3. Factoring
4. Retained profit
5. Sale of fixed assets
6. Divestment

3

What is sales/lease back

Sales/lease back is where you sell property and then rent it so you can access finance

4

What is factoring

Factoring is where you sell debt to someone else so they owe someone else the money. However you don’t receive the full amount

5

What is divestment

Divestment is where you stop investment in one area to move it to another area

6

How long is short term

0-3 years

7

How long is mid term

3-10 years

8

How long is long term

10+ years

9

Name 2 benefits of using personal savings as finance

1. Quick to obtain
2. Easy to obtain

10

Name a disadvantage of using personal savings

Unlimited liability

11

What is a benefit of using sales/leaseback

Obtain a large amount of money

12

Name a disadvantage of sales/lease back

Long term payments

13

Name a benefit of factoring

Recveive a lot of money sooner than if you waited for debt to be paid

14

Name a disadvantage of factoring

Don’t recieve the full payment back

15

Name 2 benefits of using retained profits

1. Easy to obtain
2. No risk

16

Name 2 disadvantages with using retained profits

1. May not have profits
2. May disagree with shareholders

17

Name a benefit of using sales of fixed assets

Can get rid of assets no longer needed

18

Name 2 disadvantages with selling assets

1. Can take a while to find a buyer
2. Could still be useful (opportunity costs)

19

Name a benefit of divestment

Easy to source finance

20

Name 2 disadvantages with divestment

1. May disagree with shareholders
2. Areas could have been useful to the business