TOPIC 3 ACCOUNTS & FINANCE Sources Of Finance

Learning Objectives To understand internal and external finance To be able to analyse the different sources of long-, medium-, and short-term finance To understand the role played by the main financial institutions To evaluate the advantages and disadvantages for each form of finance for a given situation

Short-term, medium-term and long-term finance Effective managers will ensure the cash flow situation of their business is considered They may face problems from time to time so they should consider different forms of finance Short term Medium term Long term

 Different sources of finance are used to deal with different situations  Serious cash flow problems can cause liquidation or bankruptcy

Short term – refers to the current year, anything that needs to be repaid to creditors and lenders within the next 12 months Medium term – more than 12 months less than 5 years Long term – Anything after 5 years

Sources of finance for the public sector Government – But where does the Government receive the money from?

What can influence your financial choice? Factor influencing financial choiceSignificance The use of the finance Risky to borrow long term finance for short term needs Cost of borrowing the finance Amount required Legal structure and desire to retain control of the organisation Amount of existing finance borrowed Flexibility of finance borrowed E.G Earlier repayments