Internal and external sources of finance

Need to know

What you need to know

• Main sources: Retained profit and the sale of assets.
• Advantages: No direct cost (interest), no loss of control or ownership.
• Disadvantages: Limited amount available, potential for shareholder conflict (opportunity cost of dividends), selling assets may be a slow process.

Explanation

Internal and external sources of finance

1. Main sources: Retained profit and the sale of assets.
2. Advantages: No direct cost (interest), no loss of control or ownership.
3. Disadvantages: Limited amount available, potential for shareholder conflict (opportunity cost of dividends), selling assets may be a slow process.