Internal Sources of finance

///Internal Sources of finance

Internal Sources of finance

Business can make use of internal sources of finance. Image credit elfidental.com

Business can make use of internal sources of finance. Image credit elfidental.com

ZIMSEC O Level Business Studies Notes: Internal Sources of finance

  • These are funds that can be raised from within the business
  • Internal sources of finance include:
  • Funds raised through the sell of goods and services (products) during a business’s normal operations
  • Retained earnings-this is when funds are ploughed back into the business for example in companies this may be in the form of what are called reserves e.g. General Reserves etc
  • This is the most popular source of finance in most businesses more especially sole traders
  • The sale of fixed assets that a business owns.
  • This might be coupled by a sale and leas back strategy where the business immediately leases back the assets from the seller so that it can keep using them
  • ¬†Additional injections by current owners are sometimes considered an internal source of finance even though some authorities treat them as an external source of finance
  • Depreciation-these is when amounts are set aside to cover the depreciation of an asset.
  • Although they are treated as an expense in the Profit and Loss Account depreciation is actually a source of finance
  • It represents funds that are accumulated by the business for the purpose of covering for the depreciation of assets.
  • Increasing creditor’s payment days and decreasing debtor’s days
  • Increasing creditors and decreasing debtors
  • Reducing the amount of stocks held by the business

To access more topics go to the O Level Business Notes page.

By |2017-01-17T11:14:18+00:00March 23rd, 2016|Notes, Ordinary Level Notes|Comments Off on Internal Sources of finance

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He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.
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