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Learning objective

Explain internal and external sources of finance, including family and friends, retained profit, share issue, loans or mortgages, selling assets, overdrafts, trade credit, hire purchase and government grants.

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Topic

Sources of finance

Subtopic

Finance sources and suitability

Aqa Gcse BusinessFinance

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Quick explanation

Explain internal and external sources of finance, including family and friends, retained profit, share issue, loans or mortgages, selling assets, overdrafts, trade credit, hire purchase and government grants

  • This point belongs to Sources of finance, especially Finance sources and suitability.
  • You need to be able to explain internal and external sources of finance, including family and friends, retained profit, share issue, loans or mortgages, selling assets, overdrafts, trade credit, hire purchase and government grants.
  • The key ideas to know are assets, government grant, and share issue.
  • Use the linked flashcards and practice questions to check recall, then practise applying the idea in an exam-style answer.

Key concepts

assetsgovernment grantshare issuetrade credithire purchasesources of finance

Why it matters

This objective helps connect Finance sources and suitability to exam-style questions, flashcards, and revision notes for Sources of finance.

Quick student answer

Explain why a small retailer might prefer an overdraft rather than a fixed-term loan to finance a seasonal sales boost.

Direct answer

An overdraft offers flexible borrowing up to a set limit, allowing the retailer to draw only what is needed during peak periods and repay quickly when sales rise. It avoids the commitment of a fixed-term loan and the associated interest on unused funds.

How it works

The answer identifies the finance type (overdraft), explains its suitability (flexibility, cost‑effectiveness during seasonality) and gives a concise example (seasonal sales boost).

Key terms

  • Retained profit: The part of a company’s profit that is retained for reinvestment or to strengthen the balance sheet, rather than distributed to shareholders.

Common trap

Confusing retained profit with retained earnings: Retained profit is the profit kept in a single accounting period, whereas retained earnings is the cumulative total of all retained profits over time.

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