Finance

Finance

Sources of Finance
1. Internal
  1. Internal sources of finance are funds found inside the business. For example, profits can be kept back, also the business can sell assets that are no longer really needed to free up cash.
2. External
  1. External sources of finance are found outside the business, eg from creditors or banks.
    1. Short Term- Payed back within a year
      1. Over Draft
        Bank allows customer to take more money out of their account than they actually have inside
      2. Trade Credit
        Supllier deliver goods but will wait a while for payment
    2. Long Term- Payed back after many years
      1. Loan, from Bank or friends and family
      2. Mortgage
        Monthly payments over years to pay off a property
      3. Hired Equipment
        Payed for Monthly and after the finall payment the equipment is the firms
Cash Flow
1. Money going in and out of a business
  1. Cash Flow Forecast
    1. Estimate of the money you expect to come in, and the money you expect to go out of a business over, usually 12 months
Simple Calculations
1. Profit
  1. Revenue- Costs= Profit
2. Net Cash Flow
  1. Payments - Receipts = Net Cash Flow
3. Closing Balance
  1. Opening Balance + Net Cash Flow= Closing Balance

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