Sources of Finance

Sources of Finance

Revision

Open Ended

Explain the difference between internal sources of finance and external sources of finance for a business.

External vs Internal

Internal money is raised from the business’s own assets or from profits left in the business (ploughed-back or retained profits)

External money raised from sources outside the business.

Open Ended

1. List 3 internal sources of finance which can be accessed by a business which has been operating for several years.

List 3 internal sources of finance that can be accessed by a business which has been operating for several years.

• Retained profits

• Selling assets

• Debt factoring

• Managing working capital more efficiently

Open Ended

List 3 internal sources of finance for an individual who would like to start their own business.

List 3 internal sources of finance for an individual who would like to start their own business.

• Selling personal assets

• Income from paid employment and self employment

• Personal savings

Open Ended

Give 3 examples of short-term external sources of finance that can be accessed by a business which has been operating for several years.

Give 3 examples of short-term external sources of finance that can be accessed a business which has bee operating for several years.

• Credit cards

• Bank overdraft

• Trade credit

Open Ended

Give 3 examples of short-term external sources of finance that can be accessed by an individual who would like to start their own business.

Give 3 examples of short-term external sources of finance that can be accessed by an individual who would like to start their own business.

• Bank overdraft

• Credit card

• Hire purchase

• Leasing out & Leasing

• Subletting a property

Open Ended

Give 4 examples of external long-term sources of finance.

Give 4 examples of external long-term sources of finance.

• Loan

• Mortgage

• Debenture

• Business Angels

• Crowd Funding

Open Ended

State the differences between ordinary shares and preference shares.

State the differences between ordinary shares and preference shares.

Ordinary shares

All companies issue ordinary shares; They carry voting rights; and The directors/managers can choose whether or not to pay dividends in some years

Preference shares

Some companies do not issue preference shares; They do not carry voting rights; and

They entitle their holder to a fixed dividend

Open Ended

State 3 advantages of raising capital using ordinary shares instead of debentures.

Open Ended

State 3 disadvantages of raising capital using long-term loans instead of using ordinary shares.