Internal And External Sources Of Finance

We can generally differentiate two sources of financing which are:

INTERNAL SOURCES

Traditionally,the major sources of finance for a limited company were internal sources:

• Retained profit
• Working capital
• Sale of assets

EXTERNAL SOURCES

Ownership Capital

Owners’refers to those people/institutions who are shareholders. Sole traders and partnerships do not have shareholders –the individual or the partners are the owners of the business but do not hold shares.

Shares are units of investment in a limited company,whether it be a public or private limited company.

Shares are generally broken down into two categories:

• Ordinary shares
• Preference shares

Non-Ownership Capital

Includes the following:

• Debentures
• Other loans
• Overdraft facilities
• Hire purchase
• Lines of credit from creditors
• Grants
• Venture capital
• Factoring and invoice discounting
• Invoice discounting
• Leasing

• What Is Meant by Asset-based Finance? What Are some of the differences between Asset-based finance and Cash Flow-based Loans/Finance
• Glossary Of Accounting &Finance Terms-Alphabet D
• Vietnam bank in line for first foreign IPO-sources
• Glossary Of Accounting &Finance Terms-Alphabet N
• Bonus Issue – Illustration And Accounting Treatment ( Part 2 of 2)
• Other Sources Of Information
• Balanced Scorecard:Sources/References For KPI’s