The business I am going to be talking about will be a shop called news, food and wine. This shop can use a wide variety of different internal and external sources, this is why I’m going to be using this business. A shop will need business finance because they might want to expand the business, they can’t afford to pay workers or the bills or they have just started up.
Internal finance is to do with money that is coming from the owners or already in the company. However external means that the money is being taken out by the company and may not be the businesses money to be spending yet they have to pay it back.
Internal finance
Internal finance consists of the money in the business such as retained profit. Retained profit is profit made
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There is also a loan which is a large amount of money someone can lend off a bank or a loan company to buy something. This may be used in a shop to buy new stock or for expanding but they don’t have the right amount of money to expand using internal finance. Loans can be arranged to pay back in small instalments which may be suitable for the shop to give back. However loans have some interest on them therefore you have to pay extra for getting the loan, the longer it takes to pay back the more the interest will be. A mortgage is a very large amount of money that can usually be taken out from a bank to buy something like a shop or a warehouse to keep stock. A shop may be paying off a mortgage by the profit they are making while they are using the shop. For a mortgage it usually has a high interest rate due to there being a large amount of money being given out. This is used when the business does not have the bulk amount of money to pay for the shop so they will allow the bank to buy it and mortgage it to the person to pay off monthly instalments for it. Hire purchase is something that is being hired yet in the meanwhile you are paying off for it, there will be monthly payments on the item. A shop would do this if they didn’t have the right amount of money at the time of purchase so they will pay off monthly. This can also be an easier than paying in bulk
Hire purchase is when a company or person lends out goods to companies for a short period of time, with added interest. Tesco could benefit if they were the company as they would lend out equipment, machinery, property and vehicles, as they would gain interest and also regain some of their investment into the product.
Loan – this refers to the money borrowed by the company, for example, for productions costs. This money is expected to be paid back to the lender with interest.
There are many rules companies must follow whenever documenting financial information or any other data which is gather during any business transactions. In order for said companies to report financial information internal controls have to be put in place as companies have to adhere to certain laws and regulations. Internal controls can be defined as a process which companies follow in order to ensure all financial reporting is done in a reliable and lawful manner. Some think of it as a system which works within a system as it plays a major role on the success of a company’s accounting system. At the organizational level, internal control objectives relate to the reliability of financial
A line of credit is a short-term loan that is approved before the money is actually needed.
It is an online transaction easy money with little information needed to borrowers. So, if a photographer has bought the lens for your camera, no need to wait for him to mortgage the equipment you want to buy the object or waiting for grant money to come; It can capture success with the cost of payday loans. For a small object like this, even if the bank approves your loan application. All this and more has become a reality with a payday loan.
Overdraft – Short term borrowing from a bank, a business will only take out as much money as it needs in order to cover
In a nutshell, a mortgage is a long-term loan that has been designed to allow the borrower to pay for his new home. Fox Business explains further: "when you set out to purchase a home, no one expects you to have, say, $500,000 in cash. So that’s
Mortgage lending is a major sector with the United States financial market today. “The modern mortgage has only been around since the 1930s, but the idea of a mortgage has been around for a lot longer.” (History of Mortgages, 2016) The literal meaning of the word ‘mortgage’ has Latin roots: ‘mort’ or death and ‘gage’ or pledge. Translated it supports “the idea that the pledge died once the loan was repaid, and also the idea that the property was ‘dead’ (or forfeit) if the loan wasn’t repaid.” (History of Mortgages, 2016) A mortgage is an agreement for the terms of your home loan, technically not the home loan itself. Real estate transactions require written documentation and this is the purpose of a mortgage.
firm’s financing, for example, issuing or repurchasing stock and borrowing or repaying loans. It also
A cash payment made by a firm to its owners in the normal course of business is called a:
There are various reasons why finance may be required. Some of the reasons for obtaining finance include to start up a new business, to expand an existing business, to be able to deal with unexpected problems in an existing business, and to be able
There are two basic ways of financing for a business: Debt financing and equity financing. Debt financing is defined as 'borrowing money that is to be repaid over a period of time, usually with interest" (Financing Basics, 1). The lender does not gain any ownership in the business that is borrowing. Equity financing is described as "an exchange of money for a share of business ownership" (Financing Basics, 1). This form of financing allows the business to obtain funds without having to repay a specific amount of money at any particular time. There are also a few different instruments that could be defined as either debt or equity. One such instrument is stock options that an employee can exercise after so many years with the
External environment is that where you have lots of factors outside the company that you can’t control whereas internal environment is the one that is within the company and you have full control on it.
Banks issue credits to organizations seeking funds for there ventures. The bank usually “prefers a self-liquidating loan in which the use of funds will ensure a built-in or automatic repayment scheme” (Block & Hirt, 2005, Chapter 8, p.
Internal auditors cannot effectively provide an analysis on the company’s internal dealings as they are part of the company. External auditors, however, can observe these processes from the outside and then determine where the funds of the company and whether the dealings adhere to the regulations. Using external auditors in a company prevents conflict of interest from happening. Conflict of interest is a situation where an individual or organization has multiple interests and of those multiple interests, one could possible corrupt the motivation for an act on the other when the auditor has any kind of beneficial interest in their client’s performance. In other circumstances, there is also the threat of familiarity where auditors become