Internal Sources of Finance

The video tutorial explores internal sources of finance, focusing on plowed back profits, cash-based methods, and debt factoring. It explains how businesses can reinvest profits, liquidate assets, and use debt factoring to improve cash flow. The tutorial also discusses the advantages and disadvantages of internal finance, highlighting potential challenges for small businesses and the importance of timely financial decisions.

What is the primary benefit of plowed back profits for a business?

• Increased shareholder dividends

• Immediate cash flow improvement

• Enhanced product quality and efficiency

• Reduced reliance on external financing

How do cash-based methods help a business financially?

• By increasing product prices

• By liquidating assets to free up cash

• By reducing employee salaries

• By increasing inventory levels

How does modern technology impact cash-based methods?

• It facilitates easier asset liquidation

• It complicates asset liquidation

• It increases inventory costs

• It reduces the need for cash

What role does a bank play in debt factoring?

• It manages invoicing and provides immediate funds

• It provides a loan to the buyer

• It reduces the seller's profit margin

• It purchases the goods from the seller

Which of the following is a disadvantage of internal sources of finance?

• Immediate cash flow issues

• Increased dependency on banks

• Slow capital accumulation

• High interest rates

Why might shareholders be dissatisfied with plowed back profits?

• They prefer immediate dividends

• They want more control over business decisions

• They dislike reinvestment in technology

• They prefer external financing options

What is a potential risk for small businesses relying on internal finance?

• Excessive borrowing

• Overexpansion

• High employee turnover

• Missed market opportunities