3. Distinguish between ownership funds and borrowed funds.
ned earnings
Distinguish between external sources and internal sources of funds
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Internal sources of finance alludes to the sources of business finance that are generated within the business, from the existing assets or activities. External sources of finance implies the arrangement of capital or funds from sources outside the business.
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Owners fund refers the funds invested by the company owners for its development. Examples include equity and preference share capitals and retained earnings. Borrowed fund refers to funds raised through borrowing and loans. ... These funds must be repaid with an interest rate.
Internal sources of finance are sources inside the business. External sources of finance, on the other hand, are sources outside the business. Companies look for funding internally when the fund requirement is quite low. ... Popular examples of internal sources of financing are profits, retained earnings, etc.
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