Chapter 19 Business Finance Needs & Sources PDF
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KL Mehta Dayanand College for Women
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Summary
This document provides an outline of different types of business finance, including sources like internal funds, retained profits, and the selling of assets. It also covers external financing options such as bank loans, share issues and government grants, and factors that influence financing decisions.
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Chapter 19: Business finance - needs and sources Learning outcomes Identify the reasons business need finance Differentiate between short term and long term finance Explain internal finance Understand external finance Understand how businesses make financial choises Why businesse...
Chapter 19: Business finance - needs and sources Learning outcomes Identify the reasons business need finance Differentiate between short term and long term finance Explain internal finance Understand external finance Understand how businesses make financial choises Why businesses need finance Start-up capital Capital expenditure – technology Working capital Expansion Non-current assets R&D Types of finance Short term < 1 years Long term > 5 years Main sources of finance - Internal 1. Owner’s savings Main sources of finance - Internal 2. Retained profits Main sources of finance - Internal 3. Sell non-current assets Main sources of finance - Internal 4. Use of working capital Cash balances Reducing inventory levels Reducing trade receivables Main sources of finance – External Short term sources 1. Overdrafts 2. Trade credit 3. Debt factoring Main sources of finance – External Long term sources 1. Bank loan 2. Hire purchase 3. Leasing Main sources of finance – External Long term sources 4. Mortgage 5. Debenture 6. Share issue Alternative source of capital 1. Government grants 2. Micro-finance 3. Crowd-funding Factors influencing the choice of finance 1. Business sizes/legal forms 2. Amount required 3. Length of time 4. Existing borrowing
