Sources of finance

Mind Map by KatnissGranger, updated more than 1 year ago
Created by KatnissGranger almost 5 years ago


Business studies hw- KM 11K

Resource summary

Sources of finance
1 Internal
1.1 Retained profit
1.1.1 Does not have to be repaid
1.1.2 No interest to pay
1.1.3 New business won't have retained profits
1.1.4 Small firm profits may be too low
1.1.5 Keeping more profits in the business reduces payments to owners
2 Sale of existing assets
2.1 Makes better use of the capital tied up in the business
2.2 Does not increase the debts of the business
2.3 Takes time, amount raised is never certain until asset is sold
2.4 Not available for new businesses
3 Sale of inventories to reduce inventory levels
3.1 Reduces opportunity cost
3.2 Must be done carefully to avoid dissapointing cutomers, if not enough goods are kept as inventory
4 Owners' savings
4.1 Should be available to firm quickly
4.1.1 No interest is paid
4.2 Savings may be too low
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