sources of finance
Question:
IDENTIFY THE SOURCES OF FINANCE AVAILABLE TO A BUSINESS
Answer:
There are a number of ways of raising finance for a business. The type of finance chosen depends on the nature of the business. Large organisations are able to use a wider variety of finance sources than are smaller ones. Finance is not just needed when starting a new business, but you may be required to seek further finance even if you’re business is well established i-e further expansion, R&D, new product launch .
No matter what business you are in, you will always have to ensure your business is adequately financed; there are two major forms
1. Internal Finance
2. External Finance
Internal Finance
Internal finance is the finance that is raised from within the company. The businessman will have to either invest his own capital ‘owner s capital’ or retain profits they have earned .This is cost effective source of getting capital and very important part of every organization but has its own limitations .Therefore the business organizations have to use the other internal sources of finance in order to meet their needs .following are examples of internal sources of finance
I. A tight credit control
II. Delay payments to creditors
III. Reduces inventory level
External Finance
There are different external sources from which businessmen can get finance, these can be; Banks, financial institutions, Capital markets, money lenders, producers, manufacturers, foreign financial institutions and agencies, etc. however in scope of raising funds depend upon the form of business organization.
There are three types of financing in external sources
I. Short term
II. Medium term
III. Long term
Short-term financing: duration of repayment is less than one year
Medium/Long term: during of repayment is more than one year
Short term Finance:
Money that is needed to finance activities that are usually going to last less than one year.
Bank overdraft
An overdraft is an agreement
IDENTIFY THE SOURCES OF FINANCE AVAILABLE TO A BUSINESS
Answer:
There are a number of ways of raising finance for a business. The type of finance chosen depends on the nature of the business. Large organisations are able to use a wider variety of finance sources than are smaller ones. Finance is not just needed when starting a new business, but you may be required to seek further finance even if you’re business is well established i-e further expansion, R&D, new product launch .
No matter what business you are in, you will always have to ensure your business is adequately financed; there are two major forms
1. Internal Finance
2. External Finance
Internal Finance
Internal finance is the finance that is raised from within the company. The businessman will have to either invest his own capital ‘owner s capital’ or retain profits they have earned .This is cost effective source of getting capital and very important part of every organization but has its own limitations .Therefore the business organizations have to use the other internal sources of finance in order to meet their needs .following are examples of internal sources of finance
I. A tight credit control
II. Delay payments to creditors
III. Reduces inventory level
External Finance
There are different external sources from which businessmen can get finance, these can be; Banks, financial institutions, Capital markets, money lenders, producers, manufacturers, foreign financial institutions and agencies, etc. however in scope of raising funds depend upon the form of business organization.
There are three types of financing in external sources
I. Short term
II. Medium term
III. Long term
Short-term financing: duration of repayment is less than one year
Medium/Long term: during of repayment is more than one year
Short term Finance:
Money that is needed to finance activities that are usually going to last less than one year.
Bank overdraft
An overdraft is an agreement