Internal Sources of Finance
Name any one internal source of finance.
Retained profits, sale of existing assets, sale of inventories, sole trader or partnership's owner's savings.
Name any three external sources of finance
Bank loans, micro-finance, crowdfunding, debentures, debt factoring, grants and subsidies, and sales of shares.
haha bozo
Name the type of short-term finance in which banks allow a business to spend more than is there in their account.
Overdrafts
Name any two long-term sources of finance.
Leasing, Hire purchase, Loans, Debentures, Sale of shares.
What are the advantages and disadvantages of using retained profits as finance?
Advantages: they aren't loans and don't have to be paid back. There is also no interest to be paid on these.
Disadvantages: New businesses don't have a lot of retained profits. Small firms might not have enough retained profits to finance their objective. Keeping profits in the business might reduce the payments to owners as well as dividends to shareholders.
Name any 6 external sources of finance.
Bank loans, micro-finance, crowdfunding, debentures, debt factoring, grants and subsidies, and sales of shares.
What are the advantages and disadvantages of selling shares?
Advantage: Permanent source of capital on which interest does not have to be paid.
Disadvantage: Dividends are paid after taxes and are expected by the shareholders. Too many shares could lead to the owner losing control over the company. It is not available to sole traders and partnerships.
Name any two types of short term finance
Overdrafts, trade credit, debt factoring
What are the advantages and disadvantages of hire purchase?
Advantage: A business does not have to look for a large cash sum to buy the asset.
Disadvantage: A cash deposit has to be initially paid and interest rates are high.
What are the advantages and disadvantages of selling existing assets to gain finance?
Advantage: Excess capital is used in a better manner. Debts do not increase.
Disadvantages: There is a time lag between the sale and the purchasing and the money isn't earned until the asset is purchased. New businesses don't have enough assets to sell.
What are the advantages and disadvantages of bank loans?
Advantages: Quick to arrange. It can be taken for varying lengths of time. Larger loans might result in low interest.
Disadvantages: Must eventually be repaid with interest. Security and collateral is usually required.
What are the advantages and disadvantages of grants and subsidies?
Advantage: These don't have to be repaid.
Disadvantage: There are conditions that the business must have to avail to these.
What are the advantages of debt factoring?
Immediate cash is made available to the business. The risk of the loan is now the factor's.
What are the advantages and disadvantages of leasing?
Advantage: The asset doesn't have to be paid for with a lot of money. The asset is maintained by the leasing company.
Disadvantage:The total leasing cost might be higher than purchasing the asset.
What are the advantages and disadvantages of using the owner's savings as a source of finance?
Advantages: Easily available to firms. No interest is paid.
Disadvantage: Savings might be too low to finance the business's aims. Owners have unlimited liability which adds to the risk factor of using savings as finance.
What are the advantages and disadvantages of microfinance?
Advantages: They lend to poor people who are unlikely to receive loans from traditional banks due to low chances of profit and low security.
Disadvantages: These will also have to be paid off with interest eventually.
What are the advantages and disadvantages of debentures?
Advantage: These can be issued for very long periods of time.
Disadvantage: These must be repaid with interest.
What are the advantages and disadvantages of delaying payments to suppliers?
Disadvantage: The supplier may refuse to give discounts or supply materials without payment.
Overdrafts are an additional amount spent from a firm's bank account whereas a loan is an amount of money borrowed from a bank.
Interest of a loan is paid on the total amount of money used and the interest on an overdraft is paid on the extra money used.
Loans tend to have fixed interest rates.
What are the advantages and disadvantages of selling inventories to gain finance?
Advantages: Reduces opportunity costs and storage costs of high inventory.
Disadvantages: It must be carefully done to ensure there are enough goods kept as inventory.
What are the advantages and disadvantages of crowdfunding?
Advantage: No initial fees have to be paid. It tests public interest in the product. Is a relatively fast way to raise finance. Can be used if traditional sources are unavailable.
Disadvantages: A project that isn't well thought out might be rejected. There is a chance that the total amount required is not raised. There needs to be enough awareness about the product for it to work. Other companies and see and 'steal' the idea for the product.
What are the advantages and disadvantages of debt factoring?
Advantage: Immediate cash is made available to the business. The risk of the debt is now the factor's and not the business'.
Disadvantage: The business does not receive 100% of the value of its debts.
What are the advantages and disadvantages of overdrafts?
Advantage: It is a flexible form of borrowing. Interest is only paid on the overdrawn amount. They are cheaper than loans.
Disadvantage: It cannot be used indefinitely. Interest has to eventually be paid and the bank can ask for the overdraft to be repaid at short notice.
Wow you chose 500 points thats a lot good on you for having the guts
you dont get any points though