3.1 Sources of Finance

3.1 Sources of Finance

All businesses need money to finance business activity.

Sources of Finance

There are a number of reasons for this:

Ø To set up a business

Ø For day to day operations

Ø To expand

Capital Expenditure

•This is the finance spent on buying fixed assets

Fixed assets cannot be consumed or sold within 12 months. They are represented as Fixed or Non-Current assets on a balance sheet.

Multiple Select

Indicate which of the following you think is a fixed asset.

• Factory, including machinery

• Car

• Cleaning materials

• Computers

• Electrical Hardware and equipment

Revenue Expenditure

Revenue expenditure is the finance spent on the day to day running of a business.

It also includes the payment of indirect costs

Indirect costs are costs that are not clearly identified with the production of a good or service (and are therefore difficult to allocate to a specific cost object).

Multiple Choice

An example of indirect costs will be

• Raw materials

• Insurance

• Machinery

• Manufacturing supplies