Pedro
HNC Business
BUSINESS ACCOUNTING
UNIT 2
Piotr (Peter) Burchardt
Tutor Name: Geoff Farr
Contents page
Page 3 - 10 * Instruction Pack * Source of finance
Source of Finance
Different ways businesses can obtain money.
Sources of finance can be classified into two different groups, which are internal and external sources of finance.
Internal –This is the type of finance which comes from the business, example of this could be assets sell. When thinking about internal sources of finance, there are 5 main, which are most useful to business, and they are: Owner’s investments, Retained profits, Sale of stock, Sale of fixed assets, Debt collection
Owners investment – Those are the money which comes from the owner or owners of the business and its savings, it can be start-up capital (those are the money that are used when the business sis setting up). Also this could be in a form of additional capital, used for expansion (“The growth of a business' product and service offerings.”) Owner’s investment is a long-term source of finance. This could be a profitable way of getting finance for the business as it doesn’t have to be repaid. Also there is no interest payable. As well as good there are some bad things about it, there is a limit of money that owner can invest in the business.
http://www.businessdictionary.com/definition/business-expansion.html
Retained Profits – This source of finance is only available to businesses which has been out there (trading) for more than one year, those are the money that are made when the profit is coming back into the business and this could be a medium or long-term source of finance. Just like owner investment it doesn’t have to be repaid, and also there is not interest payable. Also there are bad things about it like, it’s not available to a business which is new in the market, also business may not make enough profit, in order to use it.
Sale of Stock – This is the money which comes
BUSINESS ACCOUNTING
UNIT 2
Piotr (Peter) Burchardt
Tutor Name: Geoff Farr
Contents page
Page 3 - 10 * Instruction Pack * Source of finance
Source of Finance
Different ways businesses can obtain money.
Sources of finance can be classified into two different groups, which are internal and external sources of finance.
Internal –This is the type of finance which comes from the business, example of this could be assets sell. When thinking about internal sources of finance, there are 5 main, which are most useful to business, and they are: Owner’s investments, Retained profits, Sale of stock, Sale of fixed assets, Debt collection
Owners investment – Those are the money which comes from the owner or owners of the business and its savings, it can be start-up capital (those are the money that are used when the business sis setting up). Also this could be in a form of additional capital, used for expansion (“The growth of a business' product and service offerings.”) Owner’s investment is a long-term source of finance. This could be a profitable way of getting finance for the business as it doesn’t have to be repaid. Also there is no interest payable. As well as good there are some bad things about it, there is a limit of money that owner can invest in the business.
http://www.businessdictionary.com/definition/business-expansion.html
Retained Profits – This source of finance is only available to businesses which has been out there (trading) for more than one year, those are the money that are made when the profit is coming back into the business and this could be a medium or long-term source of finance. Just like owner investment it doesn’t have to be repaid, and also there is not interest payable. Also there are bad things about it like, it’s not available to a business which is new in the market, also business may not make enough profit, in order to use it.
Sale of Stock – This is the money which comes