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Health and Wealth Event

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Submitted By hulkal
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Finance is important to a business, without it, an organisation would not be able to run effectively, eventually leading the organisation to fail. The are many reasons why Finance is important to an organisation and many factors in can be used for, i.e. investing and purchasing fixed assets like land and building, necessary equipment and expanding the business. Organisations that have a solid finance available to their business are able implement changes that want, which could help to bring in more money to the organisation and allowing them to last and survive. There are two types of finances, external sources or internal sources.

Sources of Finance:
External sources of finance are available sources of income that have come from outside the organisation. Examples of external finance are:

An overdraft from the bank. A loan from a bank or building society. The sale of new shares through a share issue..

Within external sources of finance, there are two options available to the organisation, short term & long term. Long-term finance means the business will pay back the loan taken out, over a longer period of time usually one year and over. The two main sources for long term are share capital & loan capital. In contrast to Long term, Short-term finance will be paid back in a short period of time,. This is divided into bank overdraft, hire purchase, trade credit, leasing, etc.

Long term sources: Shares, Debentures, Public Deposits, Retained earnings, Term loans from banks.

Short term sources: Bank Overdraft, Hire Purchase, Trade credit, Leasing

Cash inflows to a business Cash outflows from a business
(Revenue from sales, loans, (Payment for raw materials, stock, interest, sales of assets etc) labour, insurance, rent, rates etc.)

Short term Sources of finance:
Short term sources are usually used to cover their

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