2.3 Sources of Funds + Business Summaries

Sources of Funds1.Funds? bills needed to establish grow and operate line of logical thinking?it is divided into 2 categories, internal sources such as accountability pay and external sources such as debt pay2.Internal sources/Equity finance?the money the proprietor has proposed to the caper?comes from owner?s justness/retained profits?owner?s equity is the owner?s contribution?retained profits is the money unceasing by the business after it has paid off its taxes3.External sources/Debt finance?money obtained from people other than the owners?it is divided into short polish off point/long verge/other sources of cash in handa)Short term borrowings ? debts that bequeath be repaid within a course?overdraft ? an agreement amid a commercial bank and business that whollyows a business?s cheque account to go into a deficit to a limit?bank bill ? merely a indite instruction to repay a come of money by a certain date. The bank does non provide the money, the investors p rovide the money to the business and the bank is the hostage whom provides security that the money will be repaid. b)Long term borrowings ? debts that will take between 5-25 years to repay?Mortgage ? a secured loan apply to fund the purchase of property. Property cannot be sold until all borrowings ar repaid?Debentures ? finance supplied by the world(a) public for a fixed interest rate. Debentures are emergence to government regulationc)Other sources of funds?Leasing ? the payment of money for the use of equipment own by another(prenominal) party.

It is divided into 2 categories, operational lease and financial lease. Advantages: no upfront payment, paym! ents are flexible and tax deductible?factorization ? sale of customer debt/accounts receivable to a financier at a discounted rate?Venture capital ? finance supplied by hidden investors/venture companies for a risky business that has voltage?Grants ? non-repayable financial benefits supplied by government agencies or private businesses. - financial considerations?Matching principle ? ensure short term assets are matched to... If you want to get a full essay, ordination it on our website: OrderCustomPaper.com

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