2.1.1 internal finance

• why may a business need finance

  • to start a business
  • expansion e.g. machinery and property
  • research and development
  • entering new markets
  • merger + aquisition
• owners capital advantages

  • keep 100% control of the business
  • no interest
  • no delay in obtaining the finance
• owners capital disadvantage

  • may not be able to access a lot of capital
  • owner can lose investment if it fails - could cause family conflicts
• retained profit advantage

  • no intrest
  • 100% ownership
• retained profit disadvantage

  • only feasible for profitable businesses
  • cannot pay large dividends to shareholders
• sale of assets advantage

  • depending on the assets, could be a large amount of finance
  • 100% owership
  • no intrest
• sale of assets disadvantage

  • limited to the number of assets they own
  • need to assess the liquidity depending on the asset
  • business loses the asset