2.1.1 Internal finance

• What is internal finance?

  Funding obtained from within a company's own resources.
• What are the three sources of internal finance?

  Owners capital/Equity (personal savings), Retained profits, Sales of assets
• When does a business use owners capital?

  To start or expand their business.
• What are retained profits?

  It's when a business uses historical profits from previous years to invest.
• When does a business use retained profits?

  To expand, reinvest
• What are advantages and disadvantages of using retained profit?

  Advantages: Internal source of finance, no interest payments

  Disadvantages: Limits growth potential, reduces dividends for shareholders
• Why would a business use sales of assets?


  To raise capital
• When does a business use sales of assets?


  To raise capital or reduce costs
• What are the advantages and disadvantages of using internal finance?


  Advantages: Control, no debt, no interest payments

  Disadvantages: Limited funds, potential slower growth, opportunity cost