3 Accounts and finance

Table of Contents

1. Topic pack - Accounts and finance - introduction
2. 3.1 Sources of finance - notes
   1. Sources of finance
   2. Forms of finance
   3. Type: equity or debt
   4. Source of funds
   5. Source of funds: Internal sources of finance
   6. Source of funds: External sources of finance
3. 3.1 Sources of finance - questions
4. 3.2 Investment appraisal - notes
5. Investment appraisal
6. 3.2 Investment appraisal - questions
7. 3.3 Working capital - notes
8. 3.3 Working capital - questions
9. 3.4 Budgeting - notes (HL only)
10. 3.4 Budgeting - questions
11. 3.5 Final accounts - notes
12. 3.5 Final accounts - questions
13. 3.5 Final accounts - simulations and activities
14. 3.6 Ratio analysis - notes
15. 3.6 Ratio analysis - questions
16. 3.6 Ratio analysis - simulations and activities
17. Printable version

Source of funds: Internal sources of finance AO2

AO2 You need to be able to: Demonstrate application and analysis of knowledge and understanding Command Terms: These terms require students to use their knowledge and skills to break down ideas into simpler parts and to see how the parts relate: Analyse, Apply, Comment, Demonstrate, Distinguish, Explain, Interpret, Suggest

The syllabus lists these sources:

• personal funds (for sole traders)
• retained profit
• sale of assets
  

Note: Internal means ' from within the business'.

Note: For a Sole Trader (proprietor) the most common form of finance is Personal funds that the owner puts into the biusiness. For larger organisations or established businesses the following are more appropriate:

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• Internal sources of finance

An evaluation of internal sources of finance

Internal finance has no direct cost to the business and is relatively convenient. It does not normally increase the liabilities of the business. However, in the case of sale and leaseback, there will be leasing charges. Internal sources are limited and relying on these to finance growth would severely limit the pace and scale of expansion, because the finance would be restricted by the extent of the profits generated.