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  1. 1-1-the-nature-and-purpose-of-business
    3 主题
  2. 1-2-forms-of-business
    5 主题
  3. 1-3-the-external-environment
    5 主题
  4. 2-1-management-and-leadership
    3 主题
  5. 2-2-management-decision-making
    4 主题
  6. 2-3-the-role-and-importance-of-stakeholders
    3 主题
  7. 3-1-marketing-objectives
    1 主题
  8. 3-2-understanding-markets-and-customers
    5 主题
  9. 3-3-making-marketing-decisions
    2 主题
  10. 3-4-the-marketing-mix
    7 主题
  11. 4-1-operational-objectives
    2 主题
  12. 4-2-operational-performance
    1 主题
  13. 4-3-efficiency-and-productivity
    3 主题
  14. 4-4-quality
    1 主题
  15. 4-5-inventory-and-supply-chain-management
    3 主题
  16. 5-1-financial-objectives
    2 主题
  17. 5-2-financial-performance
    6 主题
  18. 5-3-sources-of-finance
    3 主题
  19. 5-4-cash-flow-and-profit
    1 主题
  20. 6-1-human-resource-objectives
    1 主题
  21. 6-2-human-resource-performance
    1 主题
  22. 6-3-organisational-design
    3 主题
  23. 6-4-human-resource-planning
    4 主题
  24. 6-5-motivation
    4 主题
  25. 6-6-improving-employer-employee-relations
    2 主题
  26. 7-1-mission-objectives-and-strategy
    4 主题
  27. 7-2-assessing-the-internal-position-of-a-business
    10 主题
  28. 7-3-changes-in-the-external-environment
    7 主题
  29. 7-4-the-competitive-environment
    1 主题
  30. 7-5-investment-appraisal
    2 主题
  31. 8-1-strategic-direction
    1 主题
  32. 8-2-strategic-positioning
    2 主题
  33. 9-1-changes-in-scale
    4 主题
  34. 9-2-innovation
    2 主题
  35. 9-3-globalisation-and-internationalisation
    4 主题
  36. 9-4-digital-technology
    1 主题
  37. 10-1-managing-change
    3 主题
  38. 10-2-organisational-culture
    2 主题
  39. 10-3-implementing-strategy
    2 主题
  40. 10-4-strategic-failure
    2 主题
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Owners’ funds

  • An internal source of finance is money that comes from within a business

    • Examples include owners’ capital, retained profit and money generated from selling assets

  • Owners’ personal savings are a key source of funds when a business starts up

    • Owners may introduce their savings or another lump sum, e.g. money received following a redundancy

  • Owners may invest more as the business grows or if there is a specific need, e.g. a short-term cash-flow problem 

Retained profit

  • The profit that has been generated in previous years and not distributed to owners is reinvested back into the business

  • This is a cheap source of finance, as it does not involve borrowing and associated interest and arrangement fees

  • The opportunity cost of investing the money back into the business is that shareholders do not receive extra profit for their investments

Sale of assets

Fixed assets

  • Selling fixed assets that are no longer required (e.g. machinery, land, buildings) generates finance

  • A sale and leaseback arrangement may be made if a business wants to continue to use an asset but needs cash

    • The business sells an asset (most likely a building) for which it receives cash

    • The business then rents the premises from the new owners

      • E.g. in early 2023, Sainsbury’s announced that it was in talks to sell the prime retail property for £500m, which will then be leased back to them by the new owners, LXi Reit

Sale of inventory

  • Inventory may be sold at reduced prices in order to raise additional finance

  • This reduces the opportunity cost and storage cost of high inventory levels

    • It must be done carefully to avoid disappointing customers if inventory runs low

      • E.g. a clothing retail business holds a January sale to get rid of old inventory and make space for new spring stock

Advantages and disadvantages of internal finance

Advantages

Disadvantages

  • Internal finance is often free (e.g. it does not involve the payment of interest or charges)

  • It does not involve third parties who may want to influence business decisions

  • Internal finance can often be organised quickly and without significant paperwork

  • Businesses that may fail credit checks (necessary for a bank loan) can access internal finance sources more easily

  • There is a significant opportunity cost involved in the use of internal finance, e.g. once retained profit has been used, it is not available for other purposes

  • Internal finance may not be sufficient to meet the needs of the business

  • Using an internal finance method is rarely as tax-efficient as many external methods, e.g. loan repayments may be treated as a business cost and offset against tax