Commerce - Final Exams
Finance:
Formulas:
COGS (Cost of Goods Sold) → Opening Inventory/Stock + Purchases - Closing Inventory/Stock
Gross Profit → Sales Revenue - COGS
Net Profit → Gross Profit - Expenses
FINANCE REVISION
Internal sources of finance
Description
Internal sources of finance refer to money that comes from within a business. There are several internal methods a
business can use, including owners capital,retained profit and selling assets. Owners capital refers to money
invested by the owner of a business. This often comes from their personal savings.
Advantages Disadvantages
Advantages of internal sources of finance include: Disadvantages of internal sources of finance include:
● Low costs: because the firm does not have to ● Internal financing is not ideal for long-term
incur transaction costs to obtain it, nor does it projects or accelerated growth. Internal
have to pay the taxes associated with paying financing limits a company's ability to borrow
dividends. funds and therefore their growth is limited by
● retention of control and ownership the rate at which they can generate profits.
● easier to obtain for established businesses that
may already have stock or assets that can be ● Cash flow can be greatly affected by external
tapped into. financing. Payments for principal and interest
● no legal obligations. for debt financing or dividends for equity
● no approvals needed, financing can limit a company's ability to invest
in expansion, research and development,
marketing, or advertising.
,Practice questions
1. Outline the difference between internal and external sources of finance. (2 marks)
- Internal Sources of Finance:
- External Sources of Finance:
2. Explain the advantage of using retained profits rather than external sources of finance (4 marks)
, Debt- short term Description Advantages Disadvantages slay queen, thanks queen <3
A form of commercial loan on Advantages of a commercial bill include: Disadvantages of a commercial bill include:
an interest-only basis, or a
principal and interest basis. ● Liquidity: Bills are highly liquid assets. ● Absence of Bill Culture:
In times of necessity, bills can be ● Absence of Rediscounting Among Banks:
converted into cash readily by means ● Stamp Duty
Commercial Bill of rediscounting them with the central ● Attitude of Banks
bank. Bills are self-liquidating in
character since they have fixed tenure
● Certainty of Payment:
● Ideal Investment:
● High and Quick Yield:
● Easy Central Bank Control:
Finance:
Formulas:
COGS (Cost of Goods Sold) → Opening Inventory/Stock + Purchases - Closing Inventory/Stock
Gross Profit → Sales Revenue - COGS
Net Profit → Gross Profit - Expenses
FINANCE REVISION
Internal sources of finance
Description
Internal sources of finance refer to money that comes from within a business. There are several internal methods a
business can use, including owners capital,retained profit and selling assets. Owners capital refers to money
invested by the owner of a business. This often comes from their personal savings.
Advantages Disadvantages
Advantages of internal sources of finance include: Disadvantages of internal sources of finance include:
● Low costs: because the firm does not have to ● Internal financing is not ideal for long-term
incur transaction costs to obtain it, nor does it projects or accelerated growth. Internal
have to pay the taxes associated with paying financing limits a company's ability to borrow
dividends. funds and therefore their growth is limited by
● retention of control and ownership the rate at which they can generate profits.
● easier to obtain for established businesses that
may already have stock or assets that can be ● Cash flow can be greatly affected by external
tapped into. financing. Payments for principal and interest
● no legal obligations. for debt financing or dividends for equity
● no approvals needed, financing can limit a company's ability to invest
in expansion, research and development,
marketing, or advertising.
,Practice questions
1. Outline the difference between internal and external sources of finance. (2 marks)
- Internal Sources of Finance:
- External Sources of Finance:
2. Explain the advantage of using retained profits rather than external sources of finance (4 marks)
, Debt- short term Description Advantages Disadvantages slay queen, thanks queen <3
A form of commercial loan on Advantages of a commercial bill include: Disadvantages of a commercial bill include:
an interest-only basis, or a
principal and interest basis. ● Liquidity: Bills are highly liquid assets. ● Absence of Bill Culture:
In times of necessity, bills can be ● Absence of Rediscounting Among Banks:
converted into cash readily by means ● Stamp Duty
Commercial Bill of rediscounting them with the central ● Attitude of Banks
bank. Bills are self-liquidating in
character since they have fixed tenure
● Certainty of Payment:
● Ideal Investment:
● High and Quick Yield:
● Easy Central Bank Control:
