Internal sources of finance

1.Profits retained in the business

  • These are profits deliberately not paid out to owners and shareholders, but these profits are kept back for reinvestment purposes of the businesses. ‘ Ploughed back’ profit.

retained profit

2. Sale of assets

  • Established companies often find they have assets that are no longer fully employed. These could be sold to raise cash.

sale of assets

3. Reductions in working capital

  • When businesses increase stock levels or sell goods on credit to customers (debtors) , they use a source of finance.
  • When companies reduce these assets- by reducing their working capital- capital is released, which acts as a source of finance for other uses.

working cap

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