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P4 describe sources of internal and external finance for a selected business

There are 2 main ways that businesses can access financial resources: From within the business internal source From outside the business external source Internal sources If you want to grow you small business into an large one, it is very important to invest.

So then you have to rely on your own internal sources of finance to invest in your business. Retained earnings are easy source of internal finance. They are liquid assets your profit.

Unit 02 - Business Resources D/502/5409

Instead if the owner wants he can decide to not spend it but reinvest it in his own company. An example of current assets are stock holdings in other companies.

  1. Business factoring pre- empts this. Shareholders share in the profits through dividends, but the net worth of the company is devalued when Assets are loaned against.
  2. That's why it's important that the business personal financial house is in order before the owner applies for a potential business loan. Equity financing happens when businesses sell of their shares of their ownership of their company to outside sources that are willing to invest.
  3. External finance comes in two forms equity or debt.
  4. When Vodafone was created the owner often needed to use his own personal savings to start the business.

If you invest them correctly you can finance yourself with them and pay off your debts. Fixed assets are not easily converted to cash like current assets. But if Vodafone has a certain time limit before they need to pay off their debt they could use these if they are able to sell them within that time gap.

Describe sources of internal and external finance for a selected business.

These kind of assets are good to have if you want for example to renew your equipment so you just first sell your old ones. Personal savings are the backbone of many small businesses.

  • Otherwise Shares as a financial asset is not as secure as profits or owner investment;
  • Distinction For distinction the evidence must show that, in addition to the pass and merit criteria, the learner is able to:

You could maybe still have personal finances that you are be willing to be contributing to your business. When Vodafone was created the owner often needed to use his own personal savings to start the business.

  • When Vodafone was created the owner often needed to use his own personal savings to start the business;
  • It is typical for venture capital investors to identify and back companies in high technology industries such as biotechnology and ICT;
  • Venture capital typically comes from institutional investors, entrepreneurs, and high net worth individuals, and can be pooled together by hired dedicated investment firms;
  • For Building firms, houses get built, raw materials are purchased on credit, sold close to completion and then the debt is paid back;
  • Owners will also find that many lenders just don't provide seed money.

External finance comes in two forms equity or debt. Debt includes credit card purchases, bank loans or promissory notes. Equity financing happens when businesses sell of their shares of their ownership of their company to outside sources that are willing to invest.

Banks are able to offer loans, business accounts, commercial mortgages and overdraft facilities based on the business plan. A company sends an request for a loan application to a bank. The bank searches thrue the data and approves or declines then the loan.

P4 - describe sources of internal and external finance for a selected business/ M2

If its accepted it will also determine the interest that the company has to pay back as a debt for lending the money. A popular form of equity financing is venture capital.

Venture capital consists of people who invest in new and up-and-coming risky ventures, usually in return for a share of the ownership.