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Managing financial resources and decisions.
Finance & Accounting
Pages 12 (3012 words)
The most important element for any business is the availability of the funds and finance. Almost all organisations make sure that they have the required funds in order to run the operations of the business in effective and efficient manner…
Broadly, the types of sources of finance are divided into two categories namely: 1. Internal sources of finance 2. External sources of finance Different types of business have different sources of funds. The most common types of business are: sole trader, partnership, public limited company, and private limited company. Sole Trader: This form of business consists of one individual owner who is legally not disconnected from the business. But the company and personal accounts are separated. The internal sources of funds for this type of business only include the sale of the goods and stocks. This source of finance is short term as the money from sales of goods is first used for covering the operating expenses of the company (Arnold, 2008). On the other hand, the external sources of finance available to sole trader consist of different loans from banks or venture capitalists. This also includes secured loans, leases, and grants from government. The sale of the goods and stocks is only beneficial in the short term, however the loans from banks can be beneficial for the sole trader for long term financing. The venture capitalists demand for high interest rates (Gitman, 2003). ...
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