Briefly describe each and every way in which funds can be accessed through internal sources.

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Expert Solution

There are different sources of internal finance-

A. Retained earnings-retained earning are the part of the profits of the equity shareholders and they can be used for the long-term purposes of financing. there is no dilution of control and it is a cost effective method.There is a cost of retained earning associated with overall cost of capital also.

B. Sale of asset- An organisation can manage internal source of financing through sale of assets for the short term as well as long term financing.

One of the problem associated with this method is that assets are sold before their useful life.

C. Reduction of the working capital-reduction of the working capital can also be used as a source of financing for the business and these can only be used for short term perspective because reduction of working capital will mean that there would be lagging on the payment of the creditors of the company.

these are the methods which can be used by a business for internal source of financing.

jeff jeffy answered 1 year ago

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