Accounting provides information on the: 1. Resources available to a firm, 2. The means employed to finance those resources, and 3. He results achieved through their use. LOL . Understand sources of funding and income generation for business and services industries IAC . 1 Review sources of funding available to business and services industries Why business need money? The Main Sources of Finance Internal Sources External Sources Long -Term Short-Term Personal Savings- Current disposable personal income less personal expenditures. Retained Profit- is the profit kept in the company rather than paid out to shareholders as a dividend.
Trade Credit- is the credit extended to you by suppliers who let you buy now and pay later. Grants (Schemes for small business) Bank loan/ Overdraft/Credit Cards/ Sale of Stock- The act of disposing of or selling equity shares that are owned by an investor. Leasing- A contract by which one party conveys land, property, services, etc. To another for a specified time, usually in return for a periodic payment Hire Purchase- A system by which one pays for a thing in regular installment while having the use of it.
Selling Shares/l investors/Bonds Government Grants – An award of financial assistance in the form of money by the federal government to an eligible grantee with no expectation that the funds will be paid back Venture Capital- Capital invested in a project in which there is a substantial element of risk, typically a new or expanding business Sale of Assets -The compensated distribution of valuable property that can be tangible or intangible. Debt Factoring Debt Collection Debentures- A type of long-term unsecured bond (loan), taken out by a company, which it agrees to repay at a specified future date.
Mortgage/ Re-mortgage- A legal agreement by which a bank, building society, etc. Lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt. Retained Profits- is the profit kept in the company rather than paid out to shareholders as a dividend. Retained profit is widely regarded as the most important long-term source of finance for a business. Business Angels- are wealthy, entrepreneurial individuals who provide capital in return for a proportion of the company equity.