Managing Finances Resources


Task 1:
*Internal Sources: Internal finance comes from the trading of the business. Internal finance tends to be the cheapest form of finance since a business does not need to pay interest on the money. However it may not be able to generate the sums of money the business is looking for, especially for larger uses of finance.
-Personal savings
-Retained profits: (Profits generated by a company that are not distributed to stockholders (shareholders) as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset))

-Working Capital
-Sales of Fixed Assets

*External Sources: External finance comes from individuals or organizations that do not trade directly with the business e.g. banks.

-Bank Loan
-Overdraft from a bank
-Sales of new Shares through share Issues

*Long-Term Sources: Long-term finance tends to be spent on large projects that will pay back over a longer period of time. More risky so lenders tend to ask for some form of insurance or security if the company is unable to repay the loan. A mortgage is an example of secured long-term finance.

-Bank Loans
-Share Issues
-Retained Profits
-Hire Purchases: (a system by which one pays for a thing in regular installments while having the use of it)
*Short-Term Sources: Short-term finance is needed to cover the day to day running of the       business. It will be paid back in a short period of time, so less risky for lenders.
-Over Draft
-Suppliers Credit
-Working Capital