btec buisness level 3 unit 2 p4

Topics: Finance, Economics, Time Pages: 3 (275 words) Published: February 2, 2015
Internal and External Finances

• Internal financial sources: are funds that come from within the business. For example business can sell items it owns that are no longer really needed to free up cash. • External financial sources: are funds found outside the business, e.g. from banks giving loans

Short term
Medium term Long term
External

• Overdraf
• Short-term
Loan
• Hire
Purchase

• Mediumterm Loan
• Hire
Purchase
• Leasing

• Long-term
Loan
• Shares
• Debentures

internal

• Trade Credit

• Retained
Profit

• Retained
profit
• Sale of
Assets
• Sale and
Leaseback

Source 1: External financial
source
Loan: an external financial source of my chosen company (formula 1) is loans as they need to buy new car as they may now have the fund as of yet and a loan is “An amount of money that’s borrowed from the bank, then repaid (with interest) over a set period of time” this would be short term is if its for items if a smaller nature and long term for renting a land etc.…

Advantage



Easy and quick to set up because they
are known as a big successful business
it will be easy and quick for them to get
loans because banks will trust them to
pay it back



Large amounts of money can be
borrowed from the bank due to the
size of there company



Structured repayment term this is good
because the business dose not have to
pay the money back all at once but at a
convenient installments

Disadvantage
• Interest payable meaning the business
has to pay more than they borrowed
from the bank
• If repayments cannot be kept up, the
business risks getting a poor credit
rating or being made bankrupt

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