IGCSE Business Studies revision notes Finance įirms often lease equipment or machinery to avoid a large outlay of cash. 1įirm = business = company = organisation. Grants from central or local government can cost the firm nothing.
An agreed amount is borrowed and repaid over a fixed period of time with interest. Loans from a bank or a building society can be expensive. Shareholders could also put more money into a Limited Company through a rights issue. EXTERNAL SOURCES OF FINANCE A sole trader or a small business may be able to borrow money from family or friends without paying interest. Stock levels can be reduced (sold) and the money used for other things. Assets that are no longer required, like an outdated computer or an obsolete piece of machinery, can be sold to raise cash. The cash could be invested to earn interest. INTERNAL SOURCES OF FINANCE The Directors of a Public Limited Company may retain profits for a year rather than share it amongst the owners (Through paying out dividends). Try to remember three ways of raising finance from each source, internal and external:
Obtaining finance externally is usually the last option as interest has to be paid. External Internal sources of finance are a cheaper way to raise working capital.Long-term finance is used to grow or expand and is paid back over a number of years.
It provides a business with working capital. This has to be repaid over a short period. SOURCES OF FINANCE Companies1 need short-term finance to start up, or to cover day-to-day running costs. 11 TRADING ACCOUNTS AND PROFIT AND LOSS ACCOUNTS. 5 HOW TO WORK OUT THE CASH AVAILABLE TO THE BUSINESS. IGCSE FINANCE REVISION NOTES Table of contents Table of contents. IGCSE Business Studies revision notes Finance
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