Internal Sources Of Finance And Finance Essay

2349 WordsDec 12, 201610 Pages
Internal sources of finance: Internal sources of finance are funds that arise from within the business such as profits as they can be retained to grow the finance and selling assets. Retained profit Retained profit is the money kept in the company after paying dividends. It is used to reinvest in the business or to pay debt. It comes by a business after it makes profit and is kept separate to use in other ways such as expanding the business by developing new buildings or certain areas, buying new vehicles, updating the equipment and machinery or the company can also decide to save the money. This is a good method as there is no interest and it doesn 't have to be repaid like other loans. It is a long term source of finance since there is no maturity like term loans and debentures. Retained profits are flexible; the administration has control over the money; the amount which must be reinvested and which should be paid as dividends. Yet, business may not make enough profit in order to reinvest or the money could have been invested somewhere else where there are chances of earning a higher profit. It does not operate for new businesses since they haven 't made enough profit for investing in their own business. Tesco can easily use their retained profit for the above mentioned applications as they make enough profit from selling products. Selling assets Assets such as property, investments, equipment or machines which are no longer needed or have been replaced can be sold in

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