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

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.

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

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.

The syllabus lists six categories. All are relevant to Australian businesses but their roles differ.

Government shapes the financing environment through:

For Australian businesses operating internationally, global financing matters.

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.

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

Build a mixed strategy spanning internal, debt and equity, justifying each.

Many students treat them as a free pool; they are constrained by past profitability and the dividend policy.

Debentures have specific asset security; unsecured notes do not. Unsecured notes pay higher interest because of the higher risk.

Banks do not do the same job as super funds. Be specific.

RBA rates, ASIC disclosure rules, FX movements and US capital markets all shape Australian business finance. These are syllabus content. :::