Sources of Finance for IGCSE

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Internal sources of finance

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generated from within the business, e.g., retained profit, sale of assets.

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External sources of finance

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obtained from outside the business, e.g., bank loans, share capital.

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Retained profit definition

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kept in the business after dividends and taxes.

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Advantage of retained profit

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interest to pay; does not increase debt.

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Disadvantage of retained profit

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not be enough for large expansion; reduces funds for dividends.

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Sale of assets definition

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unused or unwanted business assets to raise cash.

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Advantage of sale of assets

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way to raise cash; no repayment required.

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Disadvantage of sale of assets

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lose valuable resources; not always possible.

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Bank loan definition

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money from a bank, repaid with interest over time.

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Advantage of bank loan

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raise large amounts; fixed repayment schedule.