What is the difference between internal and external sources of raising funds? Explain.

Solution

Internal sources :

1. Meaning : Sources which are generated within the business.

2. Scope : Include retained earnings, collection of receivables or debt.
3. Control : Under control of management.
4. Extent of funding : Meet the limited needs of the business.

5. Obligation : No obligation to pay any interest or dividend.

External sources :
1. Meaning : Sources that exist outside the business.

2. Scope : Include debentures, public deposits, commercial banks etc.
3. Control : outside the control of management.
4. Extent of funding : Meet the large requirements of the business.

5. Obligation : Obligation to pay interest or dividend.

Some More Questions From Sources of Business Finance Chapter

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Sources Of Business Finance

What is the difference between internal and external sources of raising funds? Explain.

Some More Questions From Sources of Business Finance Chapter

Define shares.

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Give the meaning of debenture.

Define “Ploughing back of profits”.

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Explain Bank Credit.

Give meaning of Lease Financing.

Give meaning of public deposit.

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