Internal sources:

• Retained profits are profits that a business chooses to keep rather than distribute to shareholders as dividends
• Match the internal source of finance with its description:

  Retained Profits ↔️ Profits kept for reinvestment

  Depreciation ↔️ Reduction in asset value

  Trade Credit ↔️ Delay payment for goods
• Retained earnings are kept for reinvestment to fund growth without incurring interest
• Steps in utilizing depreciation funds for reinvestment:

  1️⃣ Asset Reduction in Value

  2️⃣ Cash Flow Generation

  3️⃣ Asset Replacement Funding
• What is the primary reason depreciation is considered an internal source of finance?

  Generates cash flow
• How does utilizing depreciation funds contribute to a business's financial stability?

  Reduces reliance on borrowing
• What are the benefits of using retained profits as a source of finance?

  No interest, funds growth
• Match the characteristic with the source of finance:

  No interest costs ↔️ Internal Sources

  Interest costs must be paid ↔️ External Sources
• What is the definition of internal sources of finance?

  Funds generated within operations
• Depreciation funds can be used to replace worn-out assets
• Order the stages of utilizing retained earnings:

  1️⃣ Profit Generation

  2️⃣ Decision to Retain

  3️⃣ Allocation
• Depreciation funds can be used to avoid taking on external debt
• What is the purpose of trade credit in financing a business?

  Short-term interest-free financing
• Depreciation is a non-cash expense, which improves the business's available cash
• Trade credit allows businesses to delay payment for goods and services, making it an important internal source of finance.
• Match the internal finance source with its description:

  Retained Profits ↔️ Profits kept for reinvestment

  Depreciation ↔️ Cash from asset value reduction

  Trade Credit ↔️ Delayed supplier payments
• Internal sources of finance allow a business to retain full ownership and control.

  True
• What are internal sources of finance?

  Funds from within operations
• Trade credit allows a business to delay payment for goods and services.


  True
• What are the benefits of using retained earnings?

  Enhanced financial stability
• Why is depreciation an important internal source of finance?

  Generates cash flow
• How does depreciation contribute to financial stability?

  Avoids external debt
• Depreciation funds can be used to finance investments without incurring external debt.


  True
• Order the following internal sources of finance based on their primary purpose:

  1️⃣ Retained Profits: Funds growth and stability

  2️⃣ Depreciation: Funds asset replacement

  3️⃣ Trade Credit: Provides short-term financing
• What are the key differences between internal and external sources of finance?

  Ownership, cost, control
• External sources of finance provide larger amounts of capital but require interest costs.


  True
• Why is depreciation considered a non-cash expense?

  Generates cash flow
• How does trade credit help manage cash flow for a business?

  Delays supplier payments
• What is one key benefit of using depreciation funds?

  Funding asset replacement
• What is one key benefit of using depreciation funds?

  Funding asset replacement
• Why does using depreciation funds make a business more financially stable?

  Avoids borrowing
• Trade credit improves a business's cash flow by delaying payments.

  True
• External sources of finance require businesses to give up some ownership or control.
• One advantage of internal sources is that they incur no interest costs.
• What is one key disadvantage of relying solely on internal sources of finance?

  Limited funds
• Using internal sources allows a business to retain full ownership and control.


  True
• Internal sources may not provide sufficient capital for major growth plans.

  True
• What does depreciation represent as an internal source of finance?

  Annual reduction in asset value
• Steps in the process of generating and utilizing retained earnings:

  1️⃣ Profit Generation

  2️⃣ Decision to Retain

  3️⃣ Growth and Expansion

  4️⃣ Financial Stability
• Using retained earnings reduces the need for external debt.

  True