Sources of finance

• Internal sources of finance

  • Retained profit - profit made by businesses but kept for its own use
• Internal sources of finance

  Sale of assets - selling assets that are no longer needed by the business.
• Internal sources of finance

  Owners savings - The amount of money that the owner has invested into the business
• Advantages of retained profit

  • available straight away
  • no interest charged
• Disadvantages of retained profit

  • Money is tied up in the business so no interest is earned
  • Cant use it for other purposes ( Opportunity costs)
• Advantages of sales of assets

  • No interest charged
  • Reduced liability
• Disadvantages of selling assets

  • Opportunity cost of not being able to use the assets again
  • Might not get it sold for the full value or worth of the assets
• Advantages of using owner's savings

  • No charge
  • Easy to control how the savings are used and for what
• Disadvantages of using owner's savings

  • Opportunity cost
  • Limited to what you can afford
• Opportunity cost: loss of other alternatives when you choose a certain alternative.