Which of the following is an internal source of business finance?
Correct answer: D. Retained earnings
- A. Bank overdraft
- B. Issue of ordinary shares
- C. Trade credit
- D. Retained earnings
Explanation
Retained earnings are profits kept in the business rather than distributed to owners, so they are an internal source of finance. Bank overdrafts, share issues and trade credit obtain funds from external parties.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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