Internal Finance (Edexcel A-Level Business): Flashcards
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Internal finance
Internal finance
Money from business itself/owners, not external borrowing
3 main types of internal finance
3 main types of internal finance
Owner's capital, retained profit, sale of assets
Capital expenditure
Capital expenditure
Spending on long-term assets used repeatedly
Revenue expenditure
Revenue expenditure
Payments for goods/services consumed quickly
Owner's capital
Owner's capital
Money owners personally invest into their business
Retained profit
Retained profit
Profit after tax kept & reinvested, not distributed to owners
Most important internal finance source for established firms
Most important internal finance source for established firms
Retained profit
Sale and leaseback
Sale and leaseback
Selling asset then leasing it back for continued use
Cost advantage of internal finance
Cost advantage of internal finance
No interest payments or administration fees
Opportunity cost of retained profit
Opportunity cost of retained profit
Money retained can't be returned to owners