Quick questions on Sources of finance: internal and external (HSC Business Studies)

7short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.

What are internal v external sources?

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Internal source. Retained profits - profits the business has earned in past years and not paid out as dividends. Internal finance has no interest cost, no dilution and no external approval needed, but is limited by past profitability.

What is debt finance?

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Debt is money borrowed and repaid with interest. The syllabus separates short-term and long-term debt.

What is equity finance?

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Equity is selling ownership in the business. For a private company, equity is shares held by founders, family or private investors. For a listed public company, equity is shares traded on the ASX.

What is government influence?

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Government shapes the financing environment through:

What is global market influence?

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For Australian businesses operating internationally, global financing matters.

What is internal source?

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Retained profits - profits the business has earned in past years and not paid out as dividends. Internal finance has no interest cost, no dilution and no external approval needed, but is limited by past profitability.

What is external source?

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Any source outside the business - debt or equity. External finance unlocks larger investments than retained profit alone but introduces interest, dilution or both.

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